The Middle East crisis has evolved into a global economic shock that is weakening labour markets, pushing down working hours, reducing incomes and threatening millions of jobs worldwide, the International Labour Organization (International Labour Organization) warned in a new assessment.
The UN agency said the conflict’s ripple effects are now being felt far beyond the region, driven by surging energy prices, disrupted shipping routes, strained supply chains, weakened tourism flows, falling investment confidence and shifts in migration and remittance patterns.
It cautioned that the combined pressures risk turning what might have been a temporary energy shock into a prolonged deterioration in global decent work conditions unless governments act decisively to protect jobs and incomes.
According to the report, global working hours are projected to decline by 0.5 percent in 2026 and by 1.1 percent in 2027. The reduction is equivalent to about 14 million full-time jobs in the first year and 38 million in the second.
Labour income is also expected to fall sharply, by 1.1 percent in 2026 and 3 percent in 2027, representing losses of roughly $1.1 trillion and $3 trillion respectively, the ILO said.
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Unemployment is forecast to rise as well, though more modestly in percentage terms. The organisation estimates a 0.1 percentage point increase in 2026 and a 0.5 point rise in 2027, translating into an additional five million jobless people next year and up to 20 million by 2027.
The ILO said the shock is unevenly distributed, with countries and regions more closely tied to Gulf energy flows and energy-intensive supply chains facing the greatest exposure.
“The Arab States and Asia and the Pacific stand out as the most exposed regions,” the report said, noting that economies reliant on trade, manufacturing inputs, tourism and transport services are particularly vulnerable.
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It added that around 40 percent of employment in Arab States is concentrated in sectors highly sensitive to energy price spikes and global trade disruptions, including construction, manufacturing, agriculture, transport, wholesale and retail trade, and accommodation and food services.
Spillover effects are already visible in parts of Asia and are expected to intensify if the conflict persists or escalates further, the agency warned.
To assess potential outcomes, the ILO modelled several scenarios based on different trajectories of the crisis. Under a rapid de-escalation scenario, global working hours would still fall by 1.3 percent. A prolonged crisis would deepen the decline to 3.7 percent, while a severe escalation could push the drop as high as 10.2 percent.
Such outcomes would significantly strain labour markets already coping with post-pandemic adjustments, inflationary pressures and uneven recovery patterns across regions, the organisation said.
The ILO also warned that policy responses so far have been inconsistent and constrained by limited fiscal space in many countries. It urged governments to prioritise employment protection measures, wage support, and business resilience strategies to prevent further deterioration.
“Stronger focus on jobs, incomes and business resilience is needed to prevent a temporary energy shock from becoming a longer-lasting setback for decent work,” the report said.
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It called for coordinated international action to stabilise energy markets, safeguard vulnerable sectors and strengthen social protection systems, particularly in countries most exposed to external shocks.
The organisation stressed that without stronger intervention, the combined effects of higher energy costs and disrupted trade could widen inequality between regions and deepen vulnerabilities in already fragile labour markets.
The warning adds to growing concerns among international institutions that geopolitical instability in the Middle East is increasingly reshaping global economic prospects, with labour markets now emerging as a key transmission channel for the shock.
