The International Labour Organisation (ILO) has warned that the deepening crisis in the Middle East is set to gradually increase global unemployment, with projections indicating a rise of 0.1 percentage points in 2026 and 0.5 percentage points in 2027. The ILO's latest report, 'Employment and Social Trends: May 2026 Update', highlights that the conflict is increasingly impacting jobs, working conditions, and incomes far beyond the region.
Multiple Channels of Impact
According to the report, higher energy costs, disrupted transport routes, supply chain pressures, weaker tourism, and migration constraints are weighing on economies and labour markets worldwide. The ILO notes that while the full consequences will take time to materialise, the shock is already transmitting through multiple channels, with pressures expected to build gradually in a global economy still marked by weak growth and decent work deficits.
Scenario Analysis
Under an illustrative scenario where oil prices climb about 50% above their early 2026 average, global working hours are projected to fall by 0.5% in 2026 and 1.1% in 2027. This is equivalent to 14 million and 38 million full-time equivalent jobs, respectively. Real labour incomes are expected to decline by 1.1% and 3% ($1.1 trillion and $3 trillion), respectively.
Regional Disparities
The effects are expected to be highly uneven across regions, sectors, and workers. The Arab States and Asia and the Pacific are identified as the most exposed due to their integration with Gulf energy flows, trade routes, supply chains, and labour migration. Sangheon Lee, Chief Economist at the ILO and author of the report, stated: '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.'
Vulnerable Sectors
Lee emphasised that the world of work is one of the main channels through which global shocks become human shocks. 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 in the region could fall by 1.3% under rapid de-escalation, reaching 3.7% under a prolonged crisis and 10.2% under a severe escalation—more than twice the scale recorded during the COVID-19 pandemic in 2020.
Impact on Migrant Workers
Around 40% of employment in the region is concentrated in high-exposure sectors such as construction, manufacturing, transport, trade, and hospitality. Migrant workers are expected to bear a disproportionate share of labour market adjustment. On migration and remittances, Lee noted that they are a lifeline under pressure, and spillovers are putting them under further strain. '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 Responses
While the ILO has called for timely and well-targeted action, policy responses across countries remain uneven, fragmented, and often constrained by limited fiscal space. Measures have largely focused on short-term stabilisation, including energy subsidies, cash transfers, business support, and administrative steps for migrant workers. Policy gaps are most acute in fragile and conflict-affected contexts.
Call for Action
The report stresses that a sharper focus on jobs and incomes is needed to prevent a temporary energy shock from becoming a longer-lasting setback for decent work. This includes ensuring that policy measures reach the most affected workers and enterprises, particularly informal workers, migrant workers, refugees, and small businesses, while balancing macroeconomic stability with employment protection. The ILO also called for employment-centred crisis responses, grounded in social dialogue and aligned with international labour standards, to protect jobs, incomes, and working conditions as the crisis evolves. The ILO pledged to continue monitoring the labour market effects of the crisis as new data become available and transmission channels evolve.
