The deepening Middle East crisis is beginning to weigh heavily on labour markets across the world, threatening jobs, incomes and working conditions far beyond the conflict zone, according to a new report by the International Labour Organization.
The report warns that rising energy prices, disrupted trade routes, weaker tourism, supply chain bottlenecks and growing pressure on migration are creating a slow but powerful economic shock that could leave lasting scars on workers and businesses worldwide.
While the full impact is still unfolding, the ILO said the crisis is already spreading through global labour markets at a time when many economies are still struggling with weak growth and fragile employment conditions.
Job loss risks
Under one scenario outlined in the report, oil prices could rise by nearly 50% above their early 2026 average. If that happens, global working hours are projected to decline by 0.5% in 2026 and 1.1% in 2027.
That would translate into the equivalent of 14 million full-time jobs lost in 2026 and 38 million in 2027.
Real labour incomes are also expected to take a major hit, falling by 1.1% in 2026 and 3% in 2027. The decline could wipe out around $1.1 trillion and $3 trillion in global labour income respectively.
At the same time, global unemployment is projected to rise gradually over the two-year period.
“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,” said Sangheon Lee, Chief Economist, ILO and author of the report.
Uneven impact
The report highlights that the effects will not be felt equally across regions.
The Arab States and Asia-Pacific economies are expected to face the strongest pressure because of their close links to Gulf energy supplies, trade networks and labour migration systems.
“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,” Lee noted.
Arab states hit
The Arab States are considered the most exposed region due to direct conflict-related disruption, economic damage, displacement pressures and shocks to trade and energy markets.
The report estimates that working hours in the region could fall by 1.3% even under a rapid easing of tensions. Under a prolonged crisis, the decline could deepen to 3.7%, while a severe escalation scenario could push losses to 10.2%.
The ILO noted that such a fall would be more than double the scale experienced during the COVID-19 crisis in 2020.
Sectors such as construction, manufacturing, transport, hospitality and trade are expected to be particularly vulnerable, especially because they account for around 40% of employment across the region.
Migrant workers are also expected to bear a disproportionate share of the labour market disruption.
Asia-Pacific strain
In Asia and the Pacific, dependence on imported energy and Gulf-linked migration is already creating ripple effects across several economies.
For the wider region, working hours are projected to decline by 0.7% in 2026 and 1.5% in 2027. Labour incomes could fall by 1.5% and 4.3% during the same period.
Agriculture, construction, transport and manufacturing are among the sectors facing the highest risks, while tourism-reliant economies are also coming under increasing strain.
Migrant pressure
The report also warns that migrant workers and remittance-dependent economies may face growing uncertainty.
Labour deployments to Gulf Cooperation Council countries have reportedly dropped sharply in several labour-sending nations since the crisis began, while repatriations have started to rise.
Flight disruptions, security concerns and weaker demand in sectors such as construction, hospitality and transport are contributing to the slowdown.
Remittance flows, a financial lifeline for millions of households across South and Southeast Asia, are also beginning to weaken.
“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 says.
Policy challenge
Governments have introduced measures including energy subsidies, cash transfers and business support programmes, but the ILO said responses remain uneven and limited in many countries due to fiscal constraints.
The organisation stressed the need for stronger employment-focused policies to prevent the energy shock from becoming a deeper labour market crisis.
It also called for better protection for informal workers, migrants, refugees and small businesses, alongside policies aimed at protecting jobs and incomes while maintaining economic stability.
The ILO said it will continue monitoring the labour market fallout as the crisis evolves and new economic data emerges.