Do moral principles break down in extreme cases?

When faced with bizarre hypotheticals, advocates of rational egoism often assert that such scenarios would never happen. This seems to be dodging the question. It's said that conventional understandings of physics break down at microscopic and extremely grand-scale levels. Does morality follow a similar pattern? For example, what if a small society of people stranded on an island faced a shortage of clean water, and a single individual who owned all access to clean water refused to sell it? is that really impossible? Doesn't that show that the principle of individual rights breaks down in extreme cases?