Disruptions in the shipping market

The effective closure of the Strait of Hormuz has triggered unprecedented operational and legal disruptions across the global shipping industry. Freight rates are soaring, carriers are invoking centuries‑old legal doctrines, and supply chains are fragmenting. This brief highlights key commercial and legal implications for cargo interests.

The escalating conflict affecting the Strait of Hormuz has rapidly transformed the shipping market into what many industry participants now describe as a “wild west”. With Iranian strikes and fears of additional attacks in the Red Sea, major carriers have suspended bookings, rerouted vessels and discharged containers at unexpected ports far from their intended destinations. This raises several important problems relating to costs, liability, insurance and other commercial aspect. 

On Thursday, we gave an interview to the Danish media Inside Business about insurance aspects related to the ongoing conflict, which you can read more about here: Iran-konflikt kan udløse prisstigninger og opsigelser af forsikringer, men statens krigsforsikring er p.t. ikke i spil - InsideBusiness.

In the article we address two key issues: first, the cancellation by insurers of war risk policies with new policies being written subject to amended terms and e.g. increased premiums; and the Danish War Risk Insurance Act under which the the War Risk Insurance Institute may be activated by the Minister for Industry, Business and Financial Affairs to provide support the marine insurance market for Danish ships. We have previously written about the recent changes to War Risk Insurance Act here: Nye regler om krigsforsikring af skibe vedtaget: Styrket beredskab for den danske handelsflåde | DLA Piper.

Commercially, shippers face four‑fold increases in freight rates, driven by war‑risk premiums, emergency bunker surcharges and extensive rerouting around chokepoints. Additional unplanned costs — including storage, port charges, inland haulage and import formalities — are accumulating at scale. Several cargo owners report that containers destined for Middle Eastern ports are instead being discharged in India or the UAE, leaving consignees to manage complex onward transport under significant time pressure.

From a legal standpoint the carriers are within their right to discharge at the expense of the cargo owner. Several of the world’s largest carriers — including MSC, Maersk, CMA CGM and Hapag‑Lloyd — have notified customers that they may invoke liberty clauses to discharge cargo at the nearest safe port at the risk and expense of the cargo owner.

The carrier’s right to discharge cargo without bearing the associated costs raises important questions regarding the allocation of risk between seller and buyer. Who is responsible for the additional expenses, and must the seller arrange for the goods to be redirected to the final destination? The answers depend heavily on the international sale contract between the parties – in particular any agreed Incoterm. Under certain Incoterms provisions, the seller will generally remain responsible for the costs arising from an unexpected discharge, which will—subject, of course, to the carrier’s terms—typically include discharge costs and any related expenses. Under other Incoterms provisions, the buyer will be liable for these costs.

While disruption levels have not yet reached pandemic‑era freight rate highs, the effective closure of the Gulf to containerised maritime traffic has created bottlenecks of more than 3,000 vessels and a market environment marked by unpredictability, elevated costs and heightened legal uncertainty. In this volatile environment, proactive contractual review, targeted risk allocation and early engagement with carriers are essential for mitigating exposure during what may become a prolonged period of instability.

If you have any questions regarding shipping and transport law, our experts are available to assist you in navigating the relevant rules and challenges. We work closely with DLA Piper offices across the Middle East to provide urgent advice and assistance to clients with activities in these countries.

For questions, please contact Christian Benedictsen-Nislev.