Global events have continued to encroach into the domestic world of corporate governance and D&O insurance. Historically, “geopolitical risk” was often considered a niche concern confined to specialized sectors like oil and gas, aerospace, or companies operating in high-risk, volatile regions. However, as the first quarter of 2026 comes to a close, two military conflicts, the war in Ukraine and the expanding military conflict in the Middle East, may have a direct impact on D&O liability and exposure. 

 The following discusses the potential D&O risk stemming from managing immediate operational disruptions and unpredictable shifts in trade policy, sanctions regimes, and investor expectations that may follow. 

Sanctions, Divestment, and Disclosure

As the conflict in Ukraine enters its fifth year, the nature of the D&O risk may continue to evolve into a more complex web of long-term compliance and disclosure obligations. The initial wave of Russian sanctions was unprecedented in its speed and breadth, forcing thousands of companies to make snap decisions about exiting the market or halting operations. BP, for example, announced on February 27, 2022, just three days after the invasion of Ukraine, that it would exit its 19.75% stake in the Russian state-owned oil giant Rosneft. The decision resulted in a significant financial hit, requiring BP to write off approximately $25.5 billion in assets.

However, the prolonged instability in Ukraine may now shift from the immediate logistics of war to the long-term accuracy of corporate disclosures and the effectiveness of internal controls. Shareholders may begin to scrutinize whether companies understated the financial hit of these conflicts by delaying impairment charges for stranded assets or manufacturing facilities in a way that misled investors about the company’s true valuation. This scrutiny extends to what is now being termed “sanctions hygiene.”

The Securities Class Action brought against Super Micro Computer, Inc. in October 2024 (Super Micro SCA), may serve as a primary blueprint for an emerging litigation trend, illustrating how a failure in “sanctions hygiene” can evolve into a securities claim. As discussed in a prior post (here), while the Complaint focused on a “culture of aggressively focusing on quarterly revenue” and a “tone at the top” that ignored accounting integrity, allegations against the company included the alleged inability to maintain internal controls over its global supply chain. Specifically, a 2024 Hindenburg Research report detailed how Super Micro Computer allegedly bypassed Western export controls by utilizing a complex web of third-party intermediaries and shell companies to continue shipping high-tech components to Russia despite public claims to the contrary.

This scrutiny signals a potential shift in D&O risk from immediate wartime logistics to the long-term accuracy of corporate disclosures.  The Super Micro SCA allegations demonstrate how trade compliance has moved to a board function; the company’s auditor ultimately resigned because it could no longer rely on management’s representations regarding “governance, transparency and completeness of communications.” The resulting fallout, including an alleged 33% single-day stock plunge and an ongoing Department of Justice (DOJ) probe, may demonstrate an emerging expectation of a higher standard of oversight by directors and officers in a period of prolonged geopolitical instability.

Furthermore, boards and their D&O carriers can face increased risk regarding the mismanagement of “re-entry” or “exit” logistics. A February 2022 Yale Study, updated in March 2026, provided examples of companies taking a public stance on “values-based” divestment, often touted in ESG reports or press releases, that conflicted with actual operational footprint or its eventual quiet attempts to return to a sanctioned region.  With the SEC’s heightened focus on corporate conduct, as with its Cross Border Task Force, and its update to facilitated faster, more coordinated enforcement actions could mean that lapses in sanctions compliance may result in regulatory exposure.

Supply Chain Fragility and the New “Oil Shock”

While the war in Ukraine could be seen as a sanctions risk, the recent military conflict, beginning with the March 1, 2026, strike on Iran, which is now stretching from the Red Sea to the Persian Gulf, highlights the physical and economic vulnerabilities of global trade. The  threat to maritime security and aviation routes, may increase a level of margin volatility that executives and boards are yet unprepared to explain to the market. 

For a director, the risk can become an “omission.” When a company fails to meet quarterly earnings guidance and blames “unforeseen” logistical disruptions in the Middle East, investors may ask: Was it really unforeseen? If competitors were successfully rerouting cargo or hedging energy costs while the defendant company remained exposed, plaintiff shareholders could argue that the board failed in its duty of oversight. 

Also following the March 1, 2026 strikes on Iran, global energy markets faced immediate and severe disruption, with oil prices surging over 15% in just a few days. Given the potential for a prolonged conflict, this “oil shock” may become a structural risk driver that could erode corporate margins and destabilize cash flow. For companies and D&O insurers, the challenge extends beyond just high fuel costs; the conflict has halted energy exports through the Strait of Hormuz, forcing production stoppages. The impact of which may result in procurement challenges and unplanned capital expenditures.

With potential impairment to revenue, corporate disclosures and subsequent share price volatility may lead to shareholder scrutiny and the potential for litigation.

Discussion

The wars in Ukraine and the Middle East have the potential to become significant litigation catalysts for companies that previously treated geopolitical risk as a peripheral or infrequent board concern. As global volatility intensifies, shareholders and regulators may raise expectations around how companies identify, assess, and communicate exposure to geopolitical events.

In this environment, boards may be expected to establish more formalized geopolitical intelligence functions, implement rigorous dual‑use and trade‑compliance controls, and adopt stress‑tested scenario planning to demonstrate continuous oversight. These practices may serve as evidence that directors and officers are exercising prudent governance in the face of sustained instability.

At the same time, corporate disclosures that speak in broad or generic terms about geopolitical uncertainty may come under scrutiny. If material impacts to revenue, margins, or supply chain operations emerge from conflicts such as those in Ukraine or the Middle East, investors may argue that management failed to provide timely, specific, or accurate information. This risk is heightened if competitors were better prepared or if early warning signals were apparent but not integrated into enterprise risk management frameworks.

Ultimately, as conflicts reshape trade routes, sanctions regimes, and market expectations, companies that do not meaningfully incorporate these realities into governance and disclosure practices may face heightened allegations of oversight failures, inadequate controls, or misleading statements.