Aon: terrorism is dampening business confidence globally.

In certain parts of the world--most obviously Iraq--terrorism is on the rise, somewhat dampening international business confidence, according to broker and insurance services provider Aon Ltd. A more surprising terrorist hot spot, according to Aon, is India, the destination of so much of the developed world's business outsourcing over the past few years.

Aon's London-based terrorism-mitigation group just published the 2004 version of its Global Terrorism Risk map, which ranks India on a par with Iraq as one of the world's riskiest countries in terms of terrorism. "Around the world, we have observed an increase in both the severity of terrorist attacks and their capacity to affect business confidence," Paul Bassett, executive director of Aon's Counter Terrorism and Political Risk Division, said in a statement.

Bassett cited recent bombings in Istanbul, Turkey and Madrid, Spain. Such attacks, he said, "have both an immediate, tragic and human impact and a longer-term effect on business confidence."

The picture is darker, but not bleak, and rising terrorism threats should be taken with a dose of on-the-ground analysis, said Michel Leonard, chief economist with Aon Political Risk Services, the trade credit and political risk division of the broker's risk management arm. According to Leonard, Aon's clients who do business in India see the country as relatively stable.