The escalating crisis in the Middle East is triggering a “slow-moving and potentially long-lasting” economic shock that threatens millions of jobs, slashes incomes, and undermines working conditions far beyond the region, according to a major new report by the International Labour Organization (ILO).
The report, titled Employment and Social Trends May 2026 Update: Growing labour market risks of the Middle East crisis, reveals that higher energy costs, disrupted transport routes, strained supply chains, and migration constraints are placing severe pressure on a global economy already weakened by slow growth and existing decent work deficits.
The ILO outlines a stark illustrative scenario: if oil prices climb roughly 50% above their early 2026 average, the global labor market faces devastating disruptions over the next two years.
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Working Hours: Projected to drop by 0.5% in 2026 and 1.1% in 2027. This contraction is equivalent to losing 14 million and 38 million full-time equivalent jobs, respectively.
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Labor Income: Global real labor incomes are expected to plummet by 1.1% in 2026 and 3% in 2027—representing a staggering wealth loss of US$1.1 trillion and US$3 trillion.
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Unemployment: Global unemployment rates are projected to climb by 0.1 percentage points in 2026 and 0.5 percentage points in 2027.
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“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.”
The adverse impacts of the crisis are highly uneven, with the Arab States and the Asia and the Pacific region identified as the most exposed due to their heavy integration with Gulf energy, trade routes, and migration flows.
As the epicenter of the crisis, the Arab States face severe damage from infrastructure destruction, displacement, and trade shocks.
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Under a rapid de-escalation, working hours could still fall by 1.3%.
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Under a severe escalation, working hours could plummet by 10.2%—more than double the disruption recorded during the height of the COVID-19 pandemic in 2020.
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Approximately 40% of the region’s workforce is concentrated in high-exposure sectors (construction, manufacturing, transport, trade, and hospitality), with migrant workers expected to bear the brunt of the adjustment.
Due to its reliance on imported energy and Gulf-linked labor migration, the Asia-Pacific region faces massive spillover effects.
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Working hours are projected to drop by 0.7% in 2026 and 1.5% in 2027.
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Real labor income could fall by 1.5% and 4.3% over the same period.
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About 22% of the workforce operates in high-risk sectors like agriculture, manufacturing, and transport, while tourism-dependent economies face escalating strain.
The report highlights a worrying disruption to global labor migration and remittance corridors. Flight cancellations, heightened security concerns, and weakening labor demand in the Gulf Cooperation Council (GCC) countries have led to a sharp decline in new labor deployments and a rise in worker repatriations.
Consequently, remittance flows—which serve as a critical financial lifeline for millions of vulnerable families across South and Southeast Asia—are beginning to contract. The ILO warns that this double-blow to deployments and remittances could rapidly accelerate poverty and crush local consumption in home countries.
While many governments have introduced short-term stabilization measures—such as energy subsidies, cash transfers, and business support—the ILO criticizes current policy responses as fragmented, uneven, and constrained by limited fiscal space, particularly in fragile states.
The ILO is urgently calling for timely, well-targeted, and employment-centered crisis responses that are grounded in social dialogue and aligned with international labor standards. Policy interventions must urgently prioritize and protect:
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Informal and migrant workers
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Refugees
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Small and medium-sized enterprises (SMEs)
To prevent a temporary energy and transport shock from becoming a permanent structural setback for global decent work, the ILO emphasizes that balancing macroeconomic stability must go hand-in-hand with direct employment protection.
The ILO will continue to actively monitor the evolving transmission channels and labor market impacts as new global data emerges.
