diff --git a/bpf/bpf_lxc.c b/bpf/bpf_lxc.c
index d65b614d1d56..0df58f6e67f5 100644
--- a/bpf/bpf_lxc.c
+++ b/bpf/bpf_lxc.c
@@ -64,6 +64,35 @@ static inline bool redirect_to_proxy(int verdict, __u8 dir)
 	       (dir == CT_NEW || dir == CT_ESTABLISHED);
 }
 #endif
+/* clang-7 workaround, the intended C code generates the following
+ *  r1 = r6
+ *  r1 += 8
+ *  ... some other code r6 is ctx pointer buts it is lost after += op
+ *  *(u32 *)(r1 +0) = r4
+ *  resulting in verifier error,
+ *    "dereference of modified ctx ptr R1 off=9 disallowed"
+ *  to resolve this we use the below asm helper to force asm the
+ *  verifier can follow.
+ */
+static inline void asm_set_seclabel_identity(struct __sk_buff *skb)
+{
+	__u32 mark = MARK_MAGIC_IDENTITY;
+	__u32 key = MARK_MAGIC_KEY_MASK;
+	__u32 identity = SECLABEL;
+
+	bpf_barrier();
+	mark |= ((identity & 0xFFFF) << 16) | ((identity & 0xFF0000) >> 16);
+
+	asm volatile("r1 = *(u32 *)(%[ctx] +8)\n\t"
+		     "r1 &= %[key]\n\t"
+		     "r1 |= %[mark]\n\t"
+		     "*(u32 *)(%[ctx] +8) = r1\n\t"
+		     :
+		     : [ctx]"r"(skb), [key]"i"(key), [mark]"r"(mark)
+		     :"r1");
+	bpf_barrier();
+}
+
 
 #ifdef ENABLE_IPV6
 static inline int ipv6_l3_from_lxc(struct __sk_buff *skb,
@@ -362,12 +391,15 @@ static inline int ipv6_l3_from_lxc(struct __sk_buff *skb,
 		set_encrypt_key(skb, encrypt_key);
 #ifdef IP_POOLS
 		set_encrypt_dip(skb, tunnel_endpoint);
-#else
-		set_identity(skb, SECLABEL);
 #endif
 	}
 #endif
 #endif
+	/* Always encode the source identity when passing to the stack. If the
+	 * stack hairpins the packet back to a local endpoint the source
+	 * identity can still be derived even if SNAT is performed by a
+	 * component such as portmap */
+	asm_set_seclabel_identity(skb);
 	return TC_ACT_OK;
 }
 
@@ -697,12 +729,17 @@ static inline int handle_ipv4_from_lxc(struct __sk_buff *skb, __u32 *dstID)
 		set_encrypt_key(skb, encrypt_key);
 #ifdef IP_POOLS
 		set_encrypt_dip(skb, tunnel_endpoint);
-#else
-		set_identity(skb, SECLABEL);
 #endif
 	}
 #endif
 #endif
+
+	/* Always encode the source identity when passing to the stack. If the
+	 * stack hairpins the packet back to a local endpoint the source
+	 * identity can still be derived even if SNAT is performed by a
+	 * component such as portmap */
+	/* clang-7 workaround */
+	asm_set_seclabel_identity(skb);
 	cilium_dbg_capture(skb, DBG_CAPTURE_DELIVERY, 0);
 	return TC_ACT_OK;
 }
diff --git a/daemon/bpf.sha b/daemon/bpf.sha
index ddf6d0b7a8bf..b224cfac588c 100644
--- a/daemon/bpf.sha
+++ b/daemon/bpf.sha
@@ -1,2 +1,2 @@
-GO_BINDATA_SHA1SUM=4c9c0828b112a3149f980f7a3d37f8a2bc68b155
+GO_BINDATA_SHA1SUM=8d960d8e9b27d4db6ee23783803b118d5976d2d5
 BPF_FILES=../bpf/COPYING ../bpf/Makefile ../bpf/Makefile.bpf ../bpf/bpf_alignchecker.c ../bpf/bpf_features.h ../bpf/bpf_hostdev_ingress.c ../bpf/bpf_ipsec.c ../bpf/bpf_lxc.c ../bpf/bpf_netdev.c ../bpf/bpf_network.c ../bpf/bpf_overlay.c ../bpf/bpf_sock.c ../bpf/bpf_xdp.c ../bpf/cilium-map-migrate.c ../bpf/filter_config.h ../bpf/include/bpf/api.h ../bpf/include/elf/elf.h ../bpf/include/elf/gelf.h ../bpf/include/elf/libelf.h ../bpf/include/iproute2/bpf_elf.h ../bpf/include/linux/bpf.h ../bpf/include/linux/bpf_common.h ../bpf/include/linux/byteorder.h ../bpf/include/linux/byteorder/big_endian.h ../bpf/include/linux/byteorder/little_endian.h ../bpf/include/linux/icmp.h ../bpf/include/linux/icmpv6.h ../bpf/include/linux/if_arp.h ../bpf/include/linux/if_ether.h ../bpf/include/linux/if_packet.h ../bpf/include/linux/in.h ../bpf/include/linux/in6.h ../bpf/include/linux/ioctl.h ../bpf/include/linux/ip.h ../bpf/include/linux/ipv6.h ../bpf/include/linux/perf_event.h ../bpf/include/linux/swab.h ../bpf/include/linux/tcp.h ../bpf/include/linux/type_mapper.h ../bpf/include/linux/udp.h ../bpf/init.sh ../bpf/lib/arp.h ../bpf/lib/common.h ../bpf/lib/config.h ../bpf/lib/conntrack.h ../bpf/lib/conntrack_map.h ../bpf/lib/conntrack_test.h ../bpf/lib/csum.h ../bpf/lib/dbg.h ../bpf/lib/drop.h ../bpf/lib/encap.h ../bpf/lib/eps.h ../bpf/lib/eth.h ../bpf/lib/events.h ../bpf/lib/icmp6.h ../bpf/lib/identity.h ../bpf/lib/ipv4.h ../bpf/lib/ipv6.h ../bpf/lib/ipv6_test.h ../bpf/lib/l3.h ../bpf/lib/l4.h ../bpf/lib/lb.h ../bpf/lib/lxc.h ../bpf/lib/maps.h ../bpf/lib/metrics.h ../bpf/lib/nat.h ../bpf/lib/nat46.h ../bpf/lib/nodeport.h ../bpf/lib/policy.h ../bpf/lib/signal.h ../bpf/lib/tailcall.h ../bpf/lib/trace.h ../bpf/lib/utils.h ../bpf/lib/xdp.h ../bpf/lxc_config.h ../bpf/netdev_config.h ../bpf/node_config.h ../bpf/probes/raw_change_tail.t ../bpf/probes/raw_fib_lookup.t ../bpf/probes/raw_insn.h ../bpf/probes/raw_invalidate_hash.t ../bpf/probes/raw_lpm_map.t ../bpf/probes/raw_lru_map.t ../bpf/probes/raw_main.c ../bpf/probes/raw_max_insn.t ../bpf/probes/raw_sock_cookie.t ../bpf/run_probes.sh ../bpf/sockops/Makefile ../bpf/sockops/bpf_redir.c ../bpf/sockops/bpf_sockops.c ../bpf/sockops/bpf_sockops.h ../bpf/sockops/sockops_config.h