Middle East Crisis Threatens Millions of Jobs as Global Labour Markets Face Long-Term Shock: ILO Warns

The deepening crisis in the Middle East is no longer confined to the region’s borders. According to a new report released by the International Labour Organization (ILO), the conflict is rapidly evolving into a global labour and economic crisis, threatening millions of jobs, reducing incomes, disrupting migration and trade, and placing additional pressure on already fragile economies worldwide.

The ILO warns that the conflict’s impact will continue to unfold gradually through rising energy prices, transport disruptions, weakened tourism, strained supply chains, and reduced labour mobility. While the humanitarian consequences remain devastating, the organization stresses that the economic aftershocks are now spreading across global labour markets and could reshape employment patterns for years to come.

Global Employment at Risk

In its latest report titled Employment and Social Trends May 2026 Update: Growing Labour Market Risks of the Middle East Crisis, the ILO presents an alarming assessment of the potential consequences if the conflict intensifies further.

Under one projected scenario where oil prices surge nearly 50 percent above their early 2026 average, global working hours could decline by 0.5 percent in 2026 and 1.1 percent in 2027. This would translate into the loss of approximately 14 million full-time equivalent jobs in 2026 and nearly 38 million jobs in 2027.

At the same time, global labour incomes are expected to shrink sharply. Real labour income losses could reach 1.1 percent in 2026 and 3 percent in 2027, representing an economic loss of nearly US$1.1 trillion and US$3 trillion respectively. Unemployment rates are also expected to rise steadily during the same period.

The report emphasizes that the crisis is emerging at a time when the global economy is still struggling with weak growth, inflationary pressures, rising inequality, and persistent decent-work deficits following the COVID-19 pandemic and other geopolitical disruptions.

Middle East Crisis Becoming a Global Labour Shock

ILO Chief Economist Sangheon Lee described the situation as far more than a temporary disruption.

According to Lee, the crisis represents a “slow-moving and potentially long-lasting shock” capable of transforming labour markets worldwide. He explained that the world of work often becomes the primary channel through which geopolitical and economic shocks eventually affect ordinary people.

As higher fuel prices increase transportation and production costs, businesses across industries are being forced to reduce operations, delay hiring, or cut working hours. Sectors heavily dependent on global trade and tourism are among the first to experience pressure.

The ILO warns that unless governments intervene quickly with employment-focused policies, the current crisis could evolve into a prolonged setback for workers, particularly those already employed in insecure or informal jobs.

Arab States Face the Most Severe Impact

Among all regions, the Arab States are expected to suffer the most direct economic and labour market consequences.

The report states that working hours in the region could fall by 1.3 percent even under a rapid de-escalation scenario. If the conflict continues for an extended period, losses could rise to 3.7 percent, while a severe escalation scenario could lead to a dramatic 10.2 percent decline in working hours.

Such losses would exceed the labour market damage experienced during the peak of the COVID-19 pandemic in 2020.

Several factors are driving this severe impact:

• Ongoing conflict-related disruptions

• Destruction of economic infrastructure

• Falling investor confidence

• Declining tourism revenues

• Energy market instability

• Pressure on migrant workers and refugees

The ILO estimates that nearly 40 percent of jobs in the Arab States are concentrated in highly exposed sectors such as construction, manufacturing, transport, trade, and hospitality.

Migrant workers are expected to bear a disproportionate burden, as employers reduce labour demand and governments tighten migration policies.

Asia-Pacific Economies Also Under Pressure

The report identifies Asia and the Pacific as another highly vulnerable region due to its strong dependence on imported energy and labour migration to Gulf countries.

Countries across South Asia and Southeast Asia rely heavily on remittances sent home by migrant workers employed in the Gulf Cooperation Council (GCC) nations. Any disruption in labour migration or employment opportunities in the Gulf directly affects millions of households in countries such as India, Bangladesh, Nepal, Pakistan, Sri Lanka, and the Philippines.

According to the ILO, working hours across Asia-Pacific could decline by 0.7 percent in 2026 and 1.5 percent in 2027. Real labour income losses may reach 1.5 percent and 4.3 percent respectively.

Approximately 22 percent of workers in the region are employed in high-risk sectors including agriculture, transport, manufacturing, and construction. Tourism-dependent economies are also facing growing uncertainty as international travel weakens due to geopolitical tensions.

Migration and Remittances Becoming Increasingly Fragile

One of the most concerning aspects highlighted in the report is the pressure on migration systems and remittance flows.

Since the conflict intensified, labour deployments to GCC countries have declined significantly in several labour-exporting nations. Flight disruptions, security concerns, and weakening labour demand in sectors such as construction and hospitality are reducing overseas employment opportunities.

Meanwhile, repatriations of migrant workers are increasing.

For countries heavily dependent on overseas remittances, this trend poses serious risks. Remittances serve as a crucial source of household income and foreign exchange earnings in many developing economies.

The ILO notes early signs that remittance flows are already beginning to weaken in some countries. If deployments and remittance transfers continue to decline simultaneously, the consequences could extend far beyond migrant workers themselves, affecting poverty levels, local businesses, household consumption, and rural employment.

In nations where millions of families rely on income sent from abroad, prolonged disruptions could trigger wider social and economic instability.

Energy Prices and Supply Chains Driving Global Uncertainty

The Middle East remains central to global oil and gas production and international shipping routes. As geopolitical tensions rise, disruptions in energy markets and transport corridors are increasing costs worldwide.

Higher oil prices affect nearly every industry by increasing transportation, manufacturing, logistics, and food production costs. Businesses facing rising operational expenses often respond by slowing recruitment, reducing wages, or cutting employee hours.

Supply chain disruptions are also creating shortages and delays in critical industries ranging from electronics and manufacturing to agriculture and retail trade.

The ILO report warns that these pressures could deepen global inflationary trends while weakening already fragile economic recovery efforts.

Governments Urged to Take Immediate Action

Although several governments have introduced emergency measures such as fuel subsidies, cash transfers, and support for businesses, the ILO says current responses remain fragmented and insufficient.

The organization is urging countries to adopt stronger employment-centred crisis strategies focused on protecting jobs, wages, and working conditions.

The ILO recommends:

• Expanding social protection systems

• Supporting small and medium enterprises

• Protecting migrant workers and refugees

• Safeguarding informal workers

• Strengthening labour rights

• Promoting social dialogue between governments, employers, and workers

The report also stresses the importance of balancing economic stabilization policies with employment protection measures to prevent long-term labour market damage.

Long-Term Implications for the Global Economy

Economists believe the Middle East crisis could become one of the defining economic disruptions of the decade if tensions continue to escalate.

The world economy is already grappling with multiple challenges, including inflation, high public debt, climate-related shocks, slowing trade, and technological disruption. A prolonged geopolitical conflict affecting global energy supplies could intensify these vulnerabilities.

For workers across both developed and developing economies, the consequences may include rising living costs, reduced job security, weaker wage growth, and greater uncertainty in labour markets.

The ILO has pledged to continue monitoring the situation closely as new economic data emerges and the crisis evolves.