Middle East crisis takes toll on labor market

The crisis in the Middle East that broke out in late February has already taken a toll on businesses and the labor market, threatening livelihoods across the region and beyond.

The International Labour Organization warned in a report in May that the conflict is undermining wages and working conditions, with output and employment expected to fall this year and in 2027.

Under a scenario in which oil prices climb by about 50 percent above their January-to-February average, estimates suggest that hours worked could fall by 0.5 percent in 2026 and 1.1 percent in 2027, equivalent to 14 million and 38 million fulltime jobs globally, the report said.

The ILO noted that though the effects of the Middle East crisis are global, the most immediate impact is on the Arab States and the Asia-Pacific region.

Further, the Asia-Pacific region is also highly exposed, as spillover effects are already visible through energy import dependence, transport and logistics disruptions, tourism, labor migration and remittance links with Gulf economies.

The ILO, meanwhile, noted that the labor market impacts in Iran are not explicitly assessed due to the lack of relevant data.

Tarik Saleh, an Egyptian freelance commercial photographer based in Dubai, has seen his livelihood severely disrupted by widespread event postponements amid the regional conflict.

"I live alone in Dubai, while my wife and two children stay in Cairo. Before the tensions escalated, I shared an apartment here and sent half of my monthly income home to support my family and ensure they lived comfortably in Egypt," he said.

"Now nearly all exhibitions and commercial events — my main source of income — have been rescheduled to at least August or September, leaving me with almost no work for months."

Under labor laws in the UAE, flexible employment formats including remote work and part-time contracts are legally recognized. Many firms have shifted eligible staff members to remote work arrangements to sustain productivity amid travel disruptions and growing safety concerns among employees.

The ILO report noted that with regard to migration and remittances, migrant workers are likely to absorb a disproportionate share of the adjustments from the impact of the crisis. In the Gulf Cooperation Council region, it is estimated that for every 1 percent decline in employment among nationals in times of crisis, employment among non-nationals falls by 4 percent.

Labor migration is a major transmission channel in Asia-Pacific. Early evidence shows exceptionally sharp declines in migrant worker outflows to GCC countries and rising repatriations, while remittances are beginning to show signs of downward pressure, the ILO report said.

Deniz Istikbal, an assistant professor and economics researcher at Istanbul Medipol University in Turkiye, explained how a prolonged conflict will drag down other economies.

"The closure of trade routes due to the war has created a major risk for those who send remittances to their home countries. These countries, which have already been negatively affected through energy prices, have also faced serious foreign currency shortages. The decline in their currencies is a clear indication of this pressure," Istikbal said.

But the war will have a longer-lasting regional impact.

"The ongoing tensions in the Middle East are having a direct impact on business confidence, which remains the cornerstone of employment growth and economic stability," said Abdulrahim Naqi, former secretary-general of the Federation of GCC Chambers.

"From an employer's perspective, the greatest challenge is not only the conflict itself but the uncertainty it creates," he added.

For employees, he said, this uncertainty translates into growing concerns about job security, slower hiring, and reduced labor mobility, particularly in sectors such as logistics, aviation, tourism, manufacturing, and international trade.

Contact the writers at jan@chinadailyapac.com