Around 20% of the world’s oil and a significant share of global LNG normally passes through the Strait of Hormuz. Since late February 2026, shipping traffic has fallen to near zero, oil prices have surged, and supply chains across energy, transport and manufacturing have been thrown into disarray. Ready access to cheap oil-based fertilizers and feedstocks for plastics cannot be assumed.

At the same time, airspace closures and repeated disruptions at Doha, Dubai and Abu Dhabi have fractured global aviation networks, driving up costs and extending lead times across industries that rely on air freight and just‑in‑time logistics.

This is not a tail risk.  

It is a board‑level business risk, and it demands action now.

The current environment: A supply shock in real time

The Middle East conflict has escalated from a regional crisis into a global supply chain event.

The consequences are already visible:

• Energy prices have surged as oil and LNG exports from the region stall, feeding inflation across transport, logistics, agriculture and manufacturing.
• Jet fuel availability is tightening across many international markets. With strategic reserves limited, replenishing supply increasingly depends on imports from overseas refineries—many of which rely on Middle Eastern feedstocks and shipping routes.
• Fuel shortages in parts of regional Australia are already crippling some agriculture and tourism businesses. Restrictions on access to oil are threatening supplies of urea for fertilizer and naphtha for plastics.
• Gulf aviation hubs operate intermittently or are shut down entirely, forcing longer routes and significantly higher costs.
• Supply chain lead times are extending as shipping reroutes around Africa and air freight capacity shrinks.
• Rationing and demand‑reduction measures are emerging in parts of Asia, including work‑from‑home mandates and shortened work weeks.
• Interest rates are likely to remain higher for longer as energy‑driven inflation re‑enters the system.
• Consumer confidence and discretionary spending are under sustained pressure.

For many businesses, this is no longer a background risk to be noted in the risk register.

It is an active threat to solvency.

What boards should be doing — now

1. Commission honest cash‑flow modelling (This is a legal issue)

One of the most urgent tasks for boards is to commission or update rigorous, realistic cash‑flow forecasting. Last month’s assumptions are ancient history.

This is not just good governance. Under the Corporations Act 2001 (Cth), it is central to discharging a director’s statutory duty of care, skill and diligence and to managing insolvent trading risk.

The safe harbour defence under s 588GA protects directors only where they are pursuing a course of action reasonably likely to lead to a better outcome than immediate administration or liquidation. That protection depends on directors being properly informed.

That means:

• Up‑to‑date financial records
• Advice from appropriately qualified advisers
• Honest modelling that reflects current conditions

Boards should insist on:

• Base, downside and severe downside scenarios, reflecting sustained energy disruption and demand contraction
• Sensitivity analysis on key input prices (fuel, fertilizer, naphtha), lead times and customer behaviour
• Cash runway analysis — how long the business can meet obligations as they fall due
• Covenant compliance modelling under stress scenarios

Optimistic modelling is not harmless. If a company trades into insolvency on the back of unrealistic assumptions, directors may find the safe harbour unavailable.

2. Stress‑test supply chains and contracts

Covid‑19 exposed the fragility of single‑source supply chains. This crisis is exposing how little many businesses fixed afterwards.

Stress-testing with management the adequacy of existing supply chains means:

• Map critical inputs — including indirect exposure to Middle Eastern energy and logistics routes
• Identify alternative suppliers and assess switching costs and timing
• Review supply contracts for force majeure, price‑variation and termination rights
• Position inventory strategically where storage is feasible
• Assess customer contracts for exposure if delivery is disrupted

The question is no longer whether disruption will occur, but how long it will last.

3. Revisit force majeure — properly

The Covid‑19 litigation wave showed how often force majeure clauses fail when they are needed most.

For existing contracts, boards should ensure legal review focuses on:

• Whether current events fall within the clause (for example, “war”, “hostilities”, “government action”, “fuel shortages” or “trade route disruption”)
• Whether notice requirements have been met
• Whether obligations are suspended or terminated — and which outcome is preferable
• Whether common‑law frustration may apply if the clause is inadequate

For new contracts and renewals, clauses should be:

• Specifically tailored to energy shortages, rationing and transport disruption
• Broad on causation, covering commercial impracticability, not just impossibility
• Clear on procedure, with realistic notice requirements
• Balanced, to avoid commercial deadlock in negotiations

4. Prepare for workforce pressure

Extended disruption will create difficult workforce decisions, particularly if fuel rationing in major cities is mandated or domestic travel is curtailed.

Boards should be asking:

• Do we have sufficient operational flexibility? How could it be improved?
• Are casual and contractor arrangements robust?
• Where is the key‑person risk, and how is it managed?
• If we lose the ability to move staff quickly around the country, what is Plan B?

Unlike Covid‑19, boards should not assume rapid or generous government intervention.

The lesson we keep relearning

Covid‑19 showed what happens when efficiency is prioritised over resilience.

Businesses that survived had:

• Mapped their vulnerabilities
• Maintained liquidity and credit headroom
• Built contractual and workforce flexibility
• Sought advice early

The current crisis is different in cause, but not in consequence.

Waiting for certainty is not a strategy.

A call to action

For directors, the message is clear:

Safe harbour is powerful — but only for those who prepare honestly and early.

The Strait of Hormuz may reopen.

Aviation hubs may stabilise.

Energy markets may calm.

But boards that act now will be far better placed than those who wait.

The time to plan is now.