The Middle East crisis – a practical guide for Defence and Aerospace Contractors

The current escalation of geopolitical tensions in the Middle East is materially affecting logistics, trade routes, insurance markets and supply chains across the region. The crisis has already disrupted maritime transit through the Strait of Hormuz, a critical energy corridor through which roughly 30% of global seaborne oil flows normally pass.

Shipping suspensions, rerouted trade flows and heightened war-risk insurance premiums are now common features of regional commerce. In some cases, cargo routes are being diverted around Africa, adding weeks to transit times and increasing costs.

For contractors in the defence industry whilst the conflict may see an increased demand for product these developments create also practical operational challenges that can impair transaction performance.

For contactors in the aerospace industry, the significant downturn in air transport during such crisis may lead to attempts to invoke force majeure provisions as well as logistics issues with delivery of equipment and parts.

As such any contractors need to have in place deal mechanics to ensure that transactions remain operationally workable under stressed geopolitical conditions. The checklist below identifies key pressure points that are emerging in current transactions and provides practical structuring solutions for each.

Practical checklist for structuring defence and aerospace transactions in the Middle East during conflict

1. Timelines

Issue

Traditional timelines assume relatively predictable logistics and delivery times. During geopolitical disruption:

• Travel restrictions and security concerns may delay logistics.
• Supply chain disruptions can delay delivery of product.
• Government authorities may experience administrative delays.

In some cases, logistics disruptions caused by conflict – including shipping delays and rerouting – can extend timelines by several weeks.

Practical solutions

Build extended dates

• Include turnaround dates 90 days longer than standard market timelines.
• Allow automatic extensions triggered by force majeure or conflict-related disruptions.

Permit delayed satisfaction

• Allow certain obligations to be satisfied via force majeure delays without causing a failure to supply

Use Materiality thresholds

• Require that failure to deliver an obligation must permanently affect the ability to perform obligations, preventing minor logistical delays from blocking closing.

2. Execution of logistics and document signing

Issue

Conflict conditions can disrupt:

• travel for signatories
• courier services
• in-person notarisation requirements
• embassy legalisation processes

These challenges are particularly acute where documents require wet-ink execution or physical registration.

Practical solutions

Default to electronic execution

Where legally permissible:

• Use e-signatures and electronic closing platforms.
• Pre-confirm enforceability in each relevant jurisdiction.

Prepare alternative signing mechanics

Include provisions allowing:

• power of attorney execution
• board-authorised signatory substitutions
• split signings across jurisdictions

Digitise closing deliverables

Circulate:

• electronic constitutional documents
• digital board resolutions
• scanned notarised copies

with originals delivered later if required.

Pre-position signatories

Where physical signatures are unavoidable:

• appoint local authorised signatories
• hold pre-signed signature pages in escrow.

3. Regulatory approvals and government consents

Issue

Regional instability can slow approvals from:

• sector regulators
• ministries responsible for defence or aerospace projects

Administrative backlogs and security restrictions can significantly delay transaction timelines.

Practical solutions

Early engagement with regulators

Initiate informal pre-filing consultations before documentation is finalised.

Parallel processing

Submit regulatory filings in parallel with documentation negotiation, rather than waiting until after signing.

Government liaison advisors

For large deals:

• appoint local regulatory consultants
• maintain direct communication channels with ministries.

4. Sanctions screening and compliance

Issue

Escalating conflict may trigger rapid changes in sanctions regimes affecting:

• counterparties
• vessels
• insurers
• payment channels

Sanctions exposure may arise from transactions involving parties linked to sanctioned jurisdictions or entities.

Practical solutions

Enhanced sanctions representations

Include representations covering:

• sanctions compliance
• non-designation of counterparties
• compliance with US, EU and UK sanctions regimes.

Ongoing monitoring covenants

Continue to:

• conduct periodic sanctions screening
• notify counterparties immediately if exposure arises.

5. Insurance and war risk coverage

Issue

Conflict conditions have increased marine war-risk insurance premiums and tightened coverage terms, particularly for vessels operating in the Arabian Gulf region.

Some shipping routes and ports now require additional war-risk endorsements, while insurers may impose exclusions or higher deductibles.

Practical solutions

Require war-risk insurance

For projects involving shipping or offshore infrastructure:

• mandate marine war-risk insurance
• include coverage for terrorism, sabotage and political violence.

Minimum coverage thresholds

Define:

• minimum policy limits
• acceptable insurers

Insurance adjustment mechanisms

Allow contractors to:

• increase coverage
• switch insurers
• amend policies

without head contractor consent if required to maintain operational coverage.

Force majeure insurance extensions

Where available, include:

• political risk insurance
• business interruption coverage linked to conflict events.

6. Force majeure and material adverse change (MAC) clauses

Issue

Escalating conflict increases the risk that head contractors may invoke force majeure provisions or that contractors may face ambiguity regarding the threshold for an MAC.

Practical Solutions

Conflict-specific force majeure definitions

Explicitly reference:

• war
• military conflict
• maritime blockades
• sanctions escalation.

Objective MAC thresholds

Define MAC triggers based on:

• measurable financial impacts
• operational disruption thresholds.

Cure periods

Provide contractors with:

• remediation periods
• restructuring opportunities before enforcement.

7. Communication and crisis management framework

Issue

Geopolitical volatility requires rapid decision-making between parties.

Practical solutions

Establish crisis communication protocols

Define:

• escalation procedures
• designated contact points
• response timelines.

Regular risk reporting

Require counterparties to deliver:

• geopolitical risk updates
• logistics and insurance status reports.

Scenario planning

Transaction documentation may include conflict contingency plans, addressing:

• supply disruptions
• sanctions escalation
• insurance withdrawal.

Conclusion

The evolving geopolitical environment in the Middle East contactors to move beyond traditional documentation approaches and adopt operational resilience as a core structuring principle.

Disruptions to shipping routes, insurance markets and regulatory processes – exacerbated by the current conflict affecting air travel and key trade corridors such as the Strait of Hormuz – demonstrate how quickly operational assumptions can change.

By incorporating flexible timelines, enhanced sanctions frameworks, robust insurance structures and contingency planning into contractual documentation, contractors can ensure that transactions remain executable and resilient even in periods of geopolitical instability.