MUMBAI: India’s trade and energy supplies face fresh risks after reinsurers and Protection & Indemnity (P&I) clubs announced cancellation of war risk insurance for vessels transiting the Strait of Hormuz and Iranian waters, following an escalation in the Iran conflict. The cancellations, effective from this week, have left over 150 vessels stranded and disrupted a corridor that handles nearly one-fifth of global oil flows.P&I clubs are mutual, non-profit insurance associations owned by shipowners. They provide third-party liability cover through a pooled premium for risks such as cargo damage, pollution, crew injuries and collisions that are not covered under hull insurance. The clubs also provide legal support and dispute resolution across jurisdictions.“The industry is currently in a wait-and-watch mode, as much depends on how long the conflict persists. If it turns prolonged, insurers are likely to come together to create additional capacity for war-risk cover. Typically, there is an immediate surge in demand when hostilities break out, but that demand tends to ease quickly if the situation stabilises in a short span,” said Tapan Singhel, MD & CEO, Bajaj General Insurance.

Brokers said that in the past when international reinsurers ceased to provide cover for some risks like terrorism the Indian market had provided the capacity by building an insurance pool where domestic companies come together and share the risks. However, this tie state-owned reinsurer GIC Re, which leads domestic marine pools, has itself issued cancellation notices for marine hull war risk covers effective March 3, 2026, mirroring global reinsurers and P&I clubs. The crisis has brought marine insurance centerstage, the share of this line of non-life had shrunk to around 2% of industry premium as risks ebbed due to containarisation and more safety in transport. The size of the premium also determines the capacity of the industry to provide large covers.Their role is central to global shipping. Without P&I cover, shipowners face potentially unlimited liabilities in the event of accidents, pollution or war-related damage. In high-risk zones, the absence of insurance effectively halts voyages, as operators are unwilling to expose vessels to uninsured losses. In previous crises in the Red Sea, war risk exclusions by insurers sharply curtailed traffic and drove up freight rates.In the current episode, major P&I clubs and reinsurers have issued notices cancelling war risk cover for Iranian waters, the Persian Gulf and the Strait of Hormuz, citing tanker damage, casualties and threats from Iranian forces. Reports of VHF warnings and GPS disruptions have added to concerns. Insurers have invoked standard cancellation clauses following US and Israeli strikes on Iran, with broader policy implications if the conflict further widens.Fresh war risk cover may be available, but at sharply higher premiums. Rates that were around 0.25% of vessel value have surged multiple times, rendering transits commercially unviable for many operators. Even where cover is available, shipowners remain wary of risks such as seizures or missile strikes.

The UK economy could face a “very significant” hit from the conflict in Iran, the official budget watchdog has warned.

The Office for Budget Responsibility (OBR) said that the outlook for inflation would be “particularly uncertain” following spikes in gas and oil prices in recent days following attacks in the Middle East.

It came as the budget watchdog reduced its inflation forecast for this year, indicating that UK inflation will drop to target levels quicker than previously expected.

The OBR also cut its economic growth forecast for this year and revealed a worsening unemployment outlook for the next three years.

In its latest projections alongside the Chancellor’s spring statement, the organisation however highlighted that recent volatility in the Middle East could have an impact on a number of its projections.

The forecasts were prepared before days of recent attacks as part of an intensifying conflict between US-Israeli forces and Iran.

On Tuesday, the OBR said: “Conflict in the Middle East, which escalated as we were finalising this document, could have very significant impacts on the global and UK economies.”

David Miles, from the OBR’s budget responsibility committee, said its predictions that inflation will fall to target levels early this year have become more uncertain after jumps in oil and gas prices linked to recent attacks in the Middle East.

He said: “I think what will happen to inflation is particularly uncertain in the past few days.

“Our central expectation had been that inflation would fall back towards the Bank of England’s 2% target early this year and will be around that level at the end of the year.

“There must be more uncertainty around that right now.”

The trimmed-down inflation projections indicated that this will slow to 2.3% for 2026, down from a previous 2.5% forecast.

Experts said the lower-than-expected rate is partly down to “greater slack in the economy” and falling food and energy prices.

As a result, the OBR indicated that inflation will drop to the 2% target rate set by the Bank of England and the Government later this year.

The Bank has already suggested that inflation – the rate at which the price of goods and services rises – could fall below 2% by April.

The OBR said inflation is expected to remain at the 2% target from 2027 onwards, assuming this is not knocked off course by the potential jump in energy costs.

It came as the Chancellor Rachel Reeves told MPs in Parliament that the OBR said the UK economy would grow more slowly than previously expected in 2026, although growth will pick up in the following years.

UK gross domestic product (GDP) is expected to grow by 1.1% in 2026, as the OBR cut its previous prediction of 1.4% from last November.

The budget watchdog said the downgrade was linked to a growth slowdown late last year, loosening in the labour market and subdued data from recent business surveys.

However, it also lifted its forecasts for growth for both 2027 and 2028, with the economy to expand by 1.6% in both years.

The Chancellor said she had the “right economic plan” for the UK as she laid out her spring statement on Tuesday.

Ms Reeves also said that unemployment is “set to peak later this year” before reducing over the following years.

The OBR said that the UK unemployment rate is on track to peak at about 5.33% in 2026.

Latest data from the Office for National Statistics (ONS) showed that unemployment lifted to a five-year-high of 5.2% in the three months to December.

The OBR had previously predicted that the jobless rate would increase to 4.9% in 2026.

New forecasts show that unemployment is then on track to hit 4.9% in 2027 and 4.4% in 2028.

It had previously forecast it would be 4.6% in 2027 and 4.3% the following year.

The new forecasts have also reduced the Government’s borrowing projections for each year until 2031, in a potential boost for the Chancellor.

Reduced borrowing costs, linked to an easing in the yield on Government bonds, also meant that the Government’s headroom to meet its fiscal rules widened to £23.6 billion, compared with £21.7 billion in November’s budget.

Elliott Jordan-Doak, senior UK economist at Pantheon Macroeconomics, said: “There were few major surprises in today’s spring statement, with the Chancellor delivering the well-flagged ‘boring budget’ that we and the market were expecting.”

He added: “Chunks of the fiscal forecasts now look dated because of the rapid escalation of events in the Middle East.”

Peter Arnold, EY UK chief economist, said: “The underlying improvement in the UK’s fiscal position was supported by higher actual and expected tax receipts, driven in large part by a stronger equity market performance since November.

“There may now be doubts around how long this stock market performance can be sustained if the conflict in the Middle East is prolonged and global equity market volatility continues.”