Recent developments in the Strait of Hormuz have placed a centuries-old principle of maritime law under unprecedented strain. As highlighted in a Channel NewsAsia feature that our Managing Partner Mr. Bazul Ashhab provided his thoughts on, ongoing geopolitical tensions in the region are no longer merely a diplomatic concern they represent a direct challenge to the legal architecture governing global trade.

At the heart of this lies a deceptively simple question: Can a state control passage through one of the world’s most critical shipping lanes?

A Right That Is Not Optional: Transit Passage Under International Law

The Strait of Hormuz is classified as an international strait, governed by a distinct legal regime under the United Nations Convention on the Law of the Sea (UNCLOS).

Under UNCLOS, vessels enjoy a right of “transit passage”, described as a continuous and unimpeded right to move through such straits. This right is so fundamental that it is widely regarded as part of customary international law, binding even on states that have not formally ratified UNCLOS.

As emphasized in the CNA report, this is not a discretionary right. Singapore’s Foreign Minister, Vivian Balakrishnan, put it plainly: “There is a right of transit passage. It is not a privilege to be granted by the bordering state, it’s not a licence to be supplicated for, it is not a toll to be paid.”

The Real Risk: From Legal Certainty to Operational Uncertainty

The difficulty is not the law itself, but its enforceability in practice.

The Strait of Hormuz carries a significant portion of global energy flows, roughly a fifth of global oil trade. Any sustained interference reverberates immediately through supply chains and markets worldwide.

Against this backdrop, Bazul noted that the real issue is not whether the legal framework exists, but how it is being tested and that outcomes will ultimately be shaped by broader geopolitical considerations rather than legal entitlement alone.

Geopolitical tensions in the region have resulted in disruptions to transit passage, whether through vessel interference, naval activity, or elevated security risks. Regardless of which state’s actions trigger a given disruption, the commercial reality for all parties is the same: a legally protected right is no longer reliably exercisable.

This is how legal frameworks weaken in practice, not through formal repeal, but through repeated strategic non-compliance by multiple actors over time.

What This Means for Businesses and Stakeholders

For commercial actors, particularly those in shipping, energy, trade finance, and insurance, the implications are immediate and practical.

  • Legal rights no longer guarantee operational certainty
    • The existence of a right of passage does not ensure that passage will be safe, insurable, or commercially viable in the current environment.

  • Risk allocation becomes more complex
    • Contracts, insurance policies, and financing structures must now account for geopolitical interference with legal rights.
    • FOB and CIF contract structures allocate exposure differently; counterparties should review which of them bears the risk of disruption-related delays or losses.
    • War risk premium escalation and coverage gaps are already emerging, with some insurers narrowing the scope of what qualifies as an insured peril.

  • Disputes are inevitable
    • Increased litigation and arbitration are expected around force majeure and frustration of contracts, particularly where disruptions are prolonged.
    • Disputes over war risk and insurance coverage are likely to turn on how broadly or narrowly “war” and “hostilities” are defined in policy wordings.
    • Allocation of liability for disrupted shipments will be contested across jurisdictions, with different legal systems applying different standards.

The Strategic Lens: Managing Risk Across Jurisdictions

The battleground has shifted from the Strait itself to courtrooms and arbitral tribunals around the world. Businesses are already grappling with commercial uncertainties and contested contractual obligations arising directly from regional disruptions.

The ability to navigate such disputes will depend less on identifying the “correct” legal position, and more on:

  • Anticipating how legal arguments will be deployed across jurisdictions;
  • Understanding the practical enforcement landscape in each relevant forum; and
  • Aligning legal strategy with the geopolitical context in which disputes will ultimately be resolved.

The Strait of Hormuz is no longer just a transit chokepoint. It is a stress test for the international legal system and a reminder that legal entitlement and commercial certainty are not always the same thing.

How Oon & Bazul Can Help

Oon & Bazul is one of the largest conflict free dispute law firms with deep expertise in shipping, trade, energy, and commercial disputes. Our teams regularly act for shipowners, charterers, cargo interests, insurers, banks, and trading houses across the full spectrum of maritime and trade-related matters.

We are already advising clients on disputes and risk management issues arising from disruptions in the region, including:

  • Force majeure and frustration of contract claims across multiple jurisdictions;
  • War risk and marine insurance coverage disputes;
  • Liability for disrupted or delayed shipments;
  • Contract review and risk allocation structuring for ongoing trade exposures; and
  • Strategic advice on navigating enforcement and dispute resolution across common law and civil law jurisdictions.

If you are facing contractual uncertainty, insurance issues, or commercial disruption arising from the current situation, we would welcome the opportunity to assist.