The Middle East crisis is increasingly spilling into labour markets worldwide, threatening jobs, incomes and working conditions as higher energy costs, disrupted transport routes, weaker tourism and tighter migration flows begin to weigh on workers and businesses, the International Labour Organisation (ILO) has warned. 

In its latest Employment and Social Trends May 2026 Update, the ILO said the conflict is no longer only a regional security issue, an energy shock or a shipping disruption. Instead, it is becoming a broader economic strain, reaching workers through fuel prices, supply chains, aviation, tourism, remittances and the cost of doing business. 

The effects, according to the organisation, are expected to build gradually, with the scale of the damage depending on how long the crisis lasts and whether tensions ease or intensify further.  

However, the ILO said the shock is already moving through several channels at once, at a time when the global economy remains fragile and many labour markets are still struggling with weak growth and decent work deficits. 

Under an illustrative scenario in which oil prices rise by 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 would be equal to the loss of 14 million full-time equivalent jobs this year and 38 million next year. Real labour incomes are also expected to fall by 1.1 per cent in 2026 and 3 per cent in 2027, representing losses of around US$1.1 trillion and US$3 trillion, respectively. 

Unemployment, however, would rise more slowly, by 0.1 percentage points in 2026 and 0.5 percentage points in 2027, suggesting that the first impact may be felt through reduced working hours, weaker earnings, postponed hiring and pressure on informal or temporary workers before it appears fully in jobless figures. 

“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 world of work is one of the main channels through which global shocks become human shocks. What begins as an external shock eventually reaches workers and enterprises and can leave deeper scars by weakening the conditions that make work decent, secure and protected,” he added. 

The ILO stressed that the figures are not forecasts, but scenario-based simulations designed to show how labour markets could be affected if the oil shock and wider disruption persist. 

The technical note accompanying the report said the global and Asia-Pacific estimates are based on a local projections model, using a structural oil price shock to assess the effect on unemployment, real labour income and hours worked. It said the oil shock used in the modelling can be likened to an exogenous oil price shock, similar to the one triggered by the Iran conflict, although the results should be treated as simulations rather than predictions. 

The model compares oil prices in January and February 2026 with the March-May period, using actual values and futures market quotes. On that basis, the ILO estimated an average global oil price increase of around 50 per cent.  

For Asia and the Pacific, where Dubai crude is used as the reference price, the increase was put at around 68 per cent. 

Still, the impact will not be spread evenly. The Arab States and Asia and the Pacific are seen as the most exposed regions, mainly because of their dependence on Gulf energy flows, trade routes, supply chains and labour migration. 

The Arab States face the most direct strain, through conflict-related disruption, weaker economic activity, displacement, energy and trade shocks, as well as pressure on migrant workers and refugees. 

According to the report, total working hours in the region 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. 

Such a decline would be more than twice the scale recorded during the COVID-19 pandemic in 2020. Around 40 per cent of employment in the region is concentrated in high-exposure sectors such as construction, manufacturing, transport, trade and hospitality, while migrant workers are expected to carry a disproportionate share of the adjustment. 

To assess the Arab States, the ILO also turned to Google Trends data, reflecting the lack of timely and comparable labour market figures in fast-moving crises. 

The technical note said conventional labour market indicators are usually available with a delay and at relatively low frequency, making them less useful during periods when economic activity, mobility, trade flows and confidence can change before the effects appear in official statistics. 

For that reason, the ILO used online search behaviour as an early crisis signal, saying it can capture changes in uncertainty, business disruption, household stress and economic behaviour. The analysis covered Bahrain, Iraq, Jordan, Kuwait, Oman, Qatar, Saudi Arabia, Syria, the United Arab Emirates and Yemen, while Lebanon and the Occupied Palestinian Territory were excluded because the modelling approach could not produce comparable estimates for them. 

The ILO used 31 Google Trends indicators to create a monthly crisis-intensity signal, before comparing three possible paths for 2026. The first assumes rapid de-escalation, with the March shock fading quickly and returning to baseline by June.  

The second assumes a protracted crisis, with disruption remaining elevated through the rest of the year.  

The third assumes grave escalation, with the signal rising towards each country’s historical crisis peak and remaining high in the second half of the year. 

The organisation said the purpose was not to predict which path would materialise, but to show how different levels of disruption could feed into employment and working hours. 

Asia and the Pacific, meanwhile, are exposed through a different but closely connected set of channels. The region’s reliance on imported energy and Gulf-linked migration is already creating spillover effects in several economies. 

For the region as a whole, working hours are projected to decline by 0.7 per cent in 2026 and 1.5 per cent in 2027, while real labour income could fall by 1.5 per cent and 4.3 per cent, respectively. 

Around 22 per cent of workers in Asia and the Pacific are employed in high-exposure sectors, including agriculture, transport, manufacturing and construction. Tourism-dependent economies are also coming under pressure, as more expensive fuel and cancelled flights reduce capacity and push up the cost of international travel. 

The ILO’s technical work also shows why the shock can spread far beyond oil producers. Using international input-output tables, the organisation examined how a disruption in Gulf oil, refined petroleum products and chemicals could move through supply chains and expose workers in different countries and sectors. 

Air transport showed the highest direct dependence on crude and refined oil and gas inputs, followed by land transport, water transport and several energy-intensive manufacturing activities. Chemicals, non-metallic mineral products, steel, rubber and plastics, fishing and aquaculture, warehousing, accommodation and food services were also among the sectors exposed through energy costs or supply-chain links. 

Moreover, the report noted that Gulf countries are major exporters of fertilisers, meaning agriculture can be affected not only through transport and fuel costs, but also through more expensive inputs. 

In the technical scenario, fertilisers were subjected to a 20 per cent price shock, while price rises for different fertilisers between February and March ranged between 10 and 50 per cent. 

The ILO also said that although Brent and WTI prices rose by around 50 per cent between mid-February and their March high, prices for oils from the Gulf region increased by around 120 per cent, reflecting the fact that oil is not easily interchangeable across global markets. 

This means the shock reaches workers in stages. A shipping or aviation company may feel the pressure immediately through fuel costs. A factory may then face higher prices for imported materials. A hotel may see fewer bookings because flights are more expensive or uncertain. A farming household may be hit by higher fertiliser costs. A migrant worker may face fewer opportunities in the Gulf, while a family back home may receive less in remittances. 

The migration channel is particularly important. Since the crisis began, labour deployments to Gulf Cooperation Council countries have declined sharply in several labour-sending economies, while repatriations have increased. 

The ILO linked this to flight disruptions, security concerns and weaker labour demand in construction, hospitality and transport. 

Remittances, which remain a lifeline for many families and communities across South and Southeast Asia, are also beginning to weaken, with early signs of contraction in some countries. 

“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 said. 

The technical note also suggested that migrant workers in GCC labour markets are likely to absorb a larger share of the adjustment. Based on historical patterns, a crisis-related employment contraction that reduces citizen employment by 1 per cent is associated with an approximately 4 per cent fall in non-citizen employment. 

The ILO said this should not be read as a forecast for any specific country, but as an indication of how strongly non-citizen employment has responded to past crisis signals in Gulf labour markets. 

Policy responses have already been introduced in several countries, though the ILO said these remain uneven, fragmented and often limited by fiscal constraints. Measures have so far focused mainly on short-term stabilisation, including energy subsidies, cash transfers, business support and administrative steps for migrant workers. 

However, the organisation said a sharper focus on jobs and incomes is needed to prevent a temporary energy shock from turning into a longer-lasting setback for decent work. 

According to the report, support should reach the workers and businesses most exposed to the crisis, particularly informal workers, migrant workers, refugees and small enterprises. It also called for employment-centred crisis responses, based on social dialogue and aligned with international labour standards. 

For the ILO, the warning is not only about oil prices, trade routes or supply chains. It is about how quickly a geopolitical shock can move into everyday life, cutting hours, squeezing wages, weakening household income and leaving the most vulnerable workers with the least protection. 

The organisation said it will continue to monitor the labour market effects of the crisis as new data become available and as the channels of transmission evolve.