The Middle East crisis is increasingly affecting jobs, working conditions and incomes far beyond the region, with higher energy costs, disrupted transport routes, supply chain pressure, weaker tourism and migration constraints weighing on economies and labor markets, according to a new report released on 18 May 2026 by the International Labour Organization (ILO). The Geneva-based agency cautions that the shock is already transmitting through multiple channels, with pressures expected to build gradually. The conflict is expected to affect labor markets for some time, with the scale and duration depending on how the situation evolves. The findings appear in the Employment and Social Trends May 2026 Update: Growing labour market risks of the Middle East crisis. The report identifies rising risks to jobs, incomes and working conditions worldwide.
The ILO warns that full consequences will take time to materialize in a global economy still marked by weak growth and decent work deficits. Under an illustrative scenario in which oil prices climb about 50 per cent above their early 2026 average, global working hours are projected to fall by 0.5 per cent in 2026 and 1.1 per cent in 2027. This is equivalent to 14 million and 38 million full-time equivalent jobs, respectively. Real labor incomes are expected to decline by 1.1 per cent and 3 per cent, equal to US$1.1 trillion and US$3 trillion. Global unemployment would rise by 0.1 percentage points in 2026 and 0.5 percentage points in 2027.
Arab States and Asia and the Pacific most exposed
The Arab States are the most directly exposed, through conflict-related disruption, damage to economic activity, displacement, energy and trade shocks, and pressure on migrant workers and refugees. Total working hours could fall by 1.3 per cent under rapid de-escalation, 3.7 per cent under a prolonged crisis and 10.2 per cent under a severe escalation, more than twice the scale recorded during the COVID-19 pandemic in 2020. Around 40 per cent of regional employment is concentrated in high-exposure sectors such as construction, manufacturing, transport, trade and hospitality. In Asia and the Pacific, working hours are projected to decline by 0.7 per cent in 2026 and 1.5 per cent in 2027, while real labor income could fall by 1.5 per cent and 4.3 per cent. About 22 per cent of workers in the region are in high-exposure sectors, including agriculture, transport, manufacturing and construction.
Migration and remittances under pressure
Since the crisis began, labor deployments to Gulf Cooperation Council countries have declined sharply in several labor-sending economies, while repatriations are rising, reflecting flight disruptions, security concerns and weaker labor demand. Remittance flows, a key source of household income for many families across South and Southeast Asia, are beginning to weaken. Sangheon Lee, Chief Economist at the ILO and author of the report, said: “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.” The report adds that if the crisis disrupts both deployments and remittance flows, effects could spread to consumption, poverty and local employment in countries of origin.
Policy responses have been rolled out across countries but remain uneven, fragmented and often constrained by limited fiscal space, with the most acute gaps in fragile and conflict-affected contexts. Measures have largely focused on short-term stabilization, including energy subsidies, cash transfers, business support and administrative steps for migrant workers. The ILO calls for employment-centered crisis responses, grounded in social dialogue and aligned with international labor standards, to protect jobs, incomes and working conditions. It urges that policy measures reach the most affected workers and enterprises, particularly informal workers, migrant workers, refugees and small businesses. The ILO will continue to monitor the labor market effects of the crisis as new data become available and transmission channels evolve.
