For proponents of resources and renewables projects, the conflict in the Middle East has caused significant uncertainty. In this article, we consider the impacts of the conflict on project proponents’ existing contractual arrangements with key suppliers and contractors.
Rising costs and supply chain disruptions
The conflict in the Middle East is having a multi‑layered impact on resources and renewables projects in Australia, primarily through commodity price volatility, supply chain disruption and heightened geopolitical uncertainty. Fuel markets have been particularly sensitive, with price spikes flowing through not only to diesel and transport costs but also to petroleum‑derived inputs and energy‑intensive construction materials. This has increased project costs across the board and created challenges for budgeting, forecasting and contract pricing.
Supply chain risks have also intensified, with delays and reduced availability of critical inputs affecting project timelines, particularly for projects reliant on imported equipment or long lead items. Operators with limited storage capacity or reliance on third‑party fuel distributors are especially exposed to potential shortages.
More broadly, the conflict has contributed to uncertainty in global trade routes and shipping markets, placing additional pressure on freight availability and pricing. This is exacerbating existing constraints in logistics networks post‑COVID.
Together, these factors are increasing cost pressure, delivery risk and contractual tension across projects, requiring participants to actively manage procurement strategies, reassess risk allocation and engage proactively with counterparties to maintain project viability.
Contractual implications
Commercial contracts in the resources and renewables sectors include mechanisms which respond to price volatility, supply chain disruptions and other unexpected or out-of-the-ordinary scenarios. However, these clauses are heavily negotiated and are rarely drafted on common or ‘standard’ terms.
We discuss below some of the clauses in existing contracts which may be enlivened by the conflict in the Middle East, and the matters that project proponents should consider to properly understand their respective entitlements and exposures under these provisions.
Rise and fall
Longer-term agreements such as mining services contracts and commodity supply contracts often include rise and fall or price escalation clauses.
To understand the scope of their exposure to suppliers and contractors under these clauses, project proponents should identify precisely what costs are capable of adjustment, how those adjustments are calculated and when cost adjustments are triggered. In practice, this means considering whether the clause captures diesel, freight and oil-derived inputs (such as PVC piping), whether adjustments are tied to actual cost movements or external indices, and whether there are any caps, thresholds, exclusions or procedural requirements that may expand or limit the contractor’s entitlement.
Proponents should also be aware of whether their clauses entitle them to cost reductions in the event prices fall after the conflict subsides.
There is also a legislative overlay. The Road Transport Contractual Chain Order – Fuel Cost Recovery 2026 issued under the Fair Work Act 2009 (Cth) (Fair Work Order) mandates periodic price adjustments for fuel under contracts in a ‘road transport contractual chain (see our separate article on the Order here). Depending on the nature of the contract, the Fair Work Order may give contractors additional entitlements to price adjustments beyond those contained in the contract terms themselves.
Change in law
A ‘change-in-law’ clause may be triggered by legislation or policy changes which are implemented in response to the conflict.
In contracts which contain a change-in-law clause, proponents should consider what kinds of legal or regulatory developments trigger relief and whether the clause responds only to changes after a defined baseline date.
For example, even if the Fair Work Order does not apply directly to a project proponent’s contract, a change-in-law clause in that contract may allow the contractor or supplier to pass through cost increases incurred by the contractor or supplier as a result of the Order applying to its downstream contractual arrangements. By way of further example, some change-in-law clauses are only triggered if there is an actual impact on the performance of the relevant supply, services or works, meaning a price impact alone may not be sufficient to trigger relief under the clause.
Proponents should also consider the nature of the relief available under the clause, including whether the contractor or supplier may claim additional costs, extensions of time, production relief or a combination of these, and whether any thresholds, carve‑outs or mitigation obligations apply.
Just as importantly, proponents should be aware of any procedural conditions, including notice, substantiation and time bar requirements, because these often determine whether an asserted entitlement is valid in practice.
Force majeure
There is no general law doctrine of ‘force majeure’. As such, whether a contractor or supplier is entitled to relief for force majeure will depend on the terms of the relevant contract.
If a contract contains a force majeure clause, a project proponent should start by identifying what events are actually covered and whether the clause extends beyond direct war or embargo events to include consequential supply chain disruption, shortages, transport blockages or other indirect effects of the conflict. For example, if a force majeure clause limits relief to events occurring ‘in Australia’ or ‘on site’, it is unlikely that the clause will entitle a contractor or supplier to relief as a result of the current conflict in the Middle East.
Proponents should also assess the causal threshold for relief under the clause, including whether the contractor or supplier must show that performance has been prevented, delayed or merely made more difficult or expensive, and whether alternative sourcing or other mitigation steps are required before relief can be claimed.
Equally important to understand is the nature of the relief available, including whether the clause gives rise to extensions of time only, cost compensation suspension rights or even termination rights if the event continues for a prolonged period.
Other relevant clauses
Other clauses, including production adjustment provisions in mining services contracts and extension of time provision in construction contracts, may also be triggered by the conflict in the Middle East.
The circumstances in which relief is available under these clauses, and the type of relief available, is heavily negotiated and can vary dramatically from contract to contract.
For example, in clauses where relief is only available for owner-caused events, the supplier or contractor may not be entitled to any relief at all.
Even if relief is available, this may be limited. For example, in a mining services contract, relief may be limited to an adjustment to KPIs only, or alternatively, could entitle the contractor to standby costs. Similarly, in a construction contract, relief may entitle the contractor to an extension of time, but not necessarily to delay costs.
Again, procedural claim requirements are important. Production relief and extension of time provisions are often subject to strict notice requirements, meaning that if the requisite notices are not given, the contractor’s relief entitlement may fail, even if a ‘qualifying’ event has occurred.
Looking ahead
There is no universal outcome of the Middle East conflict under a project proponent’s contractual arrangements. Unsurprisingly, the outcome will turn on the terms of each contract.
However, even where contractors or suppliers do not have a clear contractual entitlement to relief, it may still be in the best interests of the project for a proponent to provide targeted commercial relief if that supports continuity of supply, preserves key relationships or reduces the risk of broader delay or disruption. As was demonstrated in the aftermath of the COVID pandemic, industry is capable and willing to take pragmatic steps in the face of a crisis.