The escalating crisis in the Middle East is emerging as a growing threat to jobs, incomes and working conditions across the global economy, with informal workers, migrant labourers and small businesses expected to bear the heaviest burden, according to a new report by the International Labour Organisation.
In its latest report, Employment and Social Trends May 2026 Update: Growing Labour Market Risks of the Middle East Crisis, the ILO warned that the economic consequences of the conflict are already spreading far beyond the region through higher energy costs, disrupted transport routes, weaker tourism flows, supply chain pressures and tighter migration conditions.
The United Nations labour agency said the effects are expected to deepen gradually in a global economy already grappling with weak growth, fragile labour markets and widening decent work deficits.
Under an illustrative scenario in which oil prices rise roughly 50 per cent above their early 2026 average, global working hours could decline by 0.5 per cent in 2026 and 1.1 per cent in 2027.
According to the report, this will be equivalent to the loss of about 14 million full-time equivalent jobs next year and 38 million by 2027.
Real labour incomes are also projected to shrink 1.1 per cent in 2026 and three per cent in 2027, translating into losses of approximately $1.1tn and $3tn, respectively.
Global unemployment is forecast to rise more gradually, increasing by 0.1 percentage points in 2026 and 0.5 percentage points the following year.
The ILO said the impact will not be evenly distributed, with economies in the Arab States and Asia-Pacific regions identified as particularly vulnerable because of their dependence on Gulf energy supplies, trade routes, labour migration and regional supply chains.
The Chief Economist at the ILO and author of the report, Sangheon Lee, said the labour market effects of the crisis could persist long after immediate geopolitical tensions subside.
“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 said.
“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.”
The report highlighted that workers in informal employment and migrant labourers face the greatest risks because they often lack adequate social protection, legal safeguards and income security during economic downturns.
Small businesses and enterprises operating in sectors sensitive to fuel prices, transport costs and consumer demand are also expected to face mounting pressure as the crisis evolves.
The ILO noted that several governments have introduced emergency measures aimed at cushioning the impact of rising costs and slowing economic activity. These interventions include energy subsidies, cash transfers, support for businesses and temporary administrative measures for migrant workers.
However, the agency said policy responses remain fragmented and uneven across countries, with many governments constrained by limited fiscal space and rising debt burdens. The gaps are expected to be particularly severe in fragile and conflict-affected economies where institutions and labour protections are already weak.
According to the report, without stronger labour-focused interventions, a temporary energy and geopolitical shock could evolve into a more prolonged setback for global employment and decent work.
The ILO called for employment-centred crisis responses anchored on social dialogue, stronger labour protections and adherence to international labour standards. It urged governments to ensure support measures reach the most affected groups, especially informal workers, migrant labourers, refugees and smaller enterprises.
The organisation added that balancing macroeconomic stability with employment protection would be critical as policymakers respond to mounting economic pressures linked to the crisis.
The ILO said it would continue monitoring the evolving labour market consequences of the Middle East crisis as new economic data emerge and transmission channels become clearer.
