Situational irony arises when an event occurs that is different from what is expected to happen. For instance, Portia and Nerissa offer rings to their fiancés, claiming that their love will endure as long as the rings are not given away. But in Act 4, the women themselves plot to get the rings back while disguised as the lawyer Balthazar and his clerk. Through dishonesty and persuasiveness, they manage to take the rings back from Bassanio and Gratiano. Soon after, in Act 5, they torment their fiancés by claiming that they slept with the men who took the rings, and they threaten to end their relationships. The audience hardly expects Portia and Nerissa—who gave the rings in the first place and demanded that their husbands keep them—to not only take back what they gave, but to continue their charade in such an elaborate, borderline cruel, fashion.
This trick also, ironically, defies the idyllic representation of love that Lorenzo and Jessica articulate at the start of the act. In reality, the marriages in this play thrive on deception and enduring power struggles. So while love is presented as a generously given gift, Portia and Nerissa make it clear by taking back the rings that, in any given situation, love can turn into something more punishing and unreliable.
The primary example of dramatic irony occurs in Act 4, scene 1, when Portia disguises herself as Balthazar, the lawyer—the audience knows this is the case, but no one in the court does (except Nerissa, who is also in disguise). Doctor Bellario, Portia's cousin and a lawyer himself, writes of Balthazar in a letter to the Duke, “I never knew so young a body with so old a head." This description alludes to Portia's disguise as both a male lawyer and a young person of great prudence. Her deception carries into Act 4, scene 2, when she (still disguised) persuades Bassanio to surrender his wedding ring to her; it continues in Act 5 when she feigns outrage over her husband's betrayal.
Portia, it seems, is always on the cusp of two different roles: she is known as a good Christian woman, but she is prejudiced; she preaches mercy in court, yet exhibits none; she inherently has less power because she is a woman, but inherently has more power than others because she is very wealthy. Such tension exists throughout the play, as practically every character is filled with contradictions and seems to have at least two sides. The play's use of dramatic irony regarding Portia's identity brings those tensions to the forefront.
One of the great ironies of Merchant is how the Christian characters—who base most of their actions in the Bible, and who we would therefore expect to support good faith and compassion—exhibit immense cruelty. This irony has led numerous modern critics to view the play as satirical, with the goal of inspiring audiences to reflect upon their own morality.
No one—not Antonio, Bassanio, or even Jessica—is capable of treating Shylock with kindness. Rather, they dehumanize him in order to distance themselves and to justify their own cruelty. No character manifests this hypocrisy more than Portia, who implores mercy from Shylock but who offers none in return. She and Antonio offer endless love to Bassanio, proving that they are not inherently heartless; they seem to heap abject hostility on Shylock by choice. Working in tandem in Act 4, Scene 1, Portia strips Shylock of his money and his home while Antonio forces him into the utmost degradation by making him convert to Christianity against his will.
Shylock says explicitly in Act 3, Scene 1, that his own spitefulness comes from watching the Christians and by enduring their wrath, but the Christians largely refuse to acknowledge what they have created and continued: a Christian world that dehumanizes and persecutes those outside of the ruling class.
When the Prince of Morocco arrives to partake in the casket game, he implores Portia not to judge him based on his darker skin tone. In an instance of dramatic irony, Portia then replies,
In terms of choice I am not solely led
By nice direction of a maiden’s eyes;
Besides, the lott’ry of my destiny
Bars me the right of voluntary choosing.
But if my father had not scanted me
And hedged me by his wit to yield myself
His wife who wins me by that means I told you,
Yourself, renownèd prince, then stood as fair
As any comer I have looked on yet
For my affection.
Portia claims that she does not judge suitors based on their looks and that, if she did have the freedom to choose her own husband, she would hold Morocco in as high esteem as any other man who has come to win her hand thus far. But while Morocco interprets this sweeping speech as earnest and reassuring, the audience interprets it as sarcastic, remembering how Portia harshly mocked every suitor that Nerissa mentioned in Act 1, Scene 2. This dramatic irony also hints at Portia's racial prejudice, which more fully comes to light when Morocco chooses the wrong casket; as he leaves, Portia retorts, "A gentle riddance! Draw the curtains, go. / Let all of his complexion choose me so." In this context, Portia's earlier sentiment to the Prince is even more clearly sarcastic, as she evidently does judge people based on their race. These lines therefore help to establish the dynamics of the entire play: in Portia's society, those in power (such as herself, a Christian of significant wealth), are customarily self-satisfied and antagonistic towards those different from themselves.