The Middle East crisis is spilling into labour markets worldwide, threatening jobs, incomes and working conditions, according to the International Labour Organisation (ILO).
- The Middle East crisis is spilling into labour markets worldwide, threatening jobs, incomes and working conditions, according to the International Labour Organisation (ILO).
In its latest Employment and Social Trends May 2026 Update, the ILO warns that the ongoing conflict has evolved beyond a regional security issue or an energy shock. It is now a broader economic strain, impacting workers through rising fuel prices, disrupted supply chains, weakened tourism, and tighter migration flows.
Middle east: Projected Economic Effects on Employment
The ILO’s report highlights that the effects of the crisis are expected to build gradually. The scale of the damage will depend on the crisis’s duration and whether tensions ease or escalate further. Under a scenario where oil prices rise by approximately 50 per cent above their early 2026 average, global working hours could decrease by 0.5 per cent in 2026 and by 1.1 per cent in 2027. This translates into a potential loss of 14 million full-time equivalent jobs this year and 38 million next year.
Real labour incomes are also projected to decline, with a forecasted drop of 1.1 per cent in 2026 and 3 per cent in 2027, amounting to losses of around US$1.1 trillion and US$3 trillion, respectively. Unemployment may rise more slowly, suggesting initial impacts will manifest through reduced working hours and weaker earnings rather than immediate job losses.
Long-term Implications for Labour Markets
“Beyond its human toll, the Middle East crisis is not a short-lived disruption. It is a slow-moving and potentially long-lasting shock that will gradually reshape labour markets,” said Sangheon Lee, Chief Economist at the ILO and author of the report. The ILO emphasises that while these figures are not forecasts, they are scenario-based simulations illustrating how labour markets may be affected by persistent oil price shocks.
Regional Vulnerabilities and Disparities
The impact of the crisis is expected to vary by region. The ILO identifies the Arab States and Asia-Pacific as the most exposed, largely due to their dependence on Gulf energy flows, trade routes, and labour migration. In the Arab States, total working hours could fall by as much as 10.2 per cent under severe escalation scenarios, which is more than twice the scale recorded during the COVID-19 pandemic.
High-exposure sectors such as construction, manufacturing, and hospitality employ around 40 per cent of workers in this region, with migrant workers likely bearing a disproportionate share of the adjustments. The ILO’s analysis, which included Google Trends data, highlighted the difficulty in obtaining timely labour market figures during fast-moving crises.
Impact on Migrant Workers and Remittances
The migration channel is particularly significant, as labour deployments to Gulf Cooperation Council countries have declined sharply, with increasing repatriations from several labour-sending economies. The ILO attributes these trends to flight disruptions, security concerns, and decreased labour demand in key sectors. Remittances, a vital lifeline for many families in South and Southeast Asia, are showing early signs of contraction, potentially affecting local economies.
“If the crisis disrupts both deployments and remittance flows, the effects could spread to consumption, poverty, and local employment in countries of origin,” the report warned. The ILO’s findings indicate that historical patterns suggest a 1 per cent drop in citizen employment is associated with a roughly 4 per cent decline in non-citizen employment during similar crises.
Policy Responses and Future Considerations
Despite the challenges, several countries have implemented policy measures aimed at stabilisation, including energy subsidies and cash transfers. However, the ILO notes that these efforts remain uneven and limited by fiscal constraints. There is a pressing need for a sharper focus on jobs and incomes to prevent a temporary energy shock from evolving into a long-lasting setback for decent work.
The report calls for targeted support to reach those most exposed to the crisis, including informal workers, migrant workers, refugees, and small enterprises. The ILO is committed to monitoring the evolving labour market impacts of the crisis as new data emerges.
