When distant crises hit close to home: Workers and enterprises in Asia and the Pacific feel the effects

The Middle East crisis may seem geographically distant from workers in Asia and the Pacific. Yet in today's interconnected economy, events unfolding thousands of kilometres away can quickly affect jobs, incomes and livelihoods across the region. Higher energy costs, disruptions to trade and transport, and growing uncertainty around labour migration and remittances are already beginning to transmit the shock beyond the conflict zone.

The region is among the most exposed to the crisis. Its economies are deeply integrated into global supply chains, while they depend heavily on imported energy from Gulf countries, and maintain strong migration links with this region of the world. According to ILO estimates, around 22 per cent of workers in Asia and the Pacific are employed in sectors facing high exposure to the shock, while a further 62 per cent work are in sectors with medium levels of exposure.

The warning from the ILO's recent Employment and Social Trends: May 2026 Update is clear. If oil prices remain elevated for a protracted period, hours worked in the region could decline by 0.7 per cent in 2026 and 1.5 per cent in 2027. That would be equivalent to the loss of around 11 million full-time equivalent jobs this year and more than 30 million next year. Real labour incomes could fall by 1.5 per cent in 2026 and 4.3 per cent in 2027, while the unemployment rate is projected to rise by 0.2 percentage points in 2026 and 0.8 percentage points by 2027.

Agriculture provides a very fitting example of how the crisis can affect livelihoods across the region, especially in low- and middle-income countries. Rising fuel and fertilizer costs are increasing production costs and putting pressure on farm incomes. While employment itself may not be immediately affected, particularly where alternative livelihood opportunities are limited, rural households are likely to face lower real incomes and greater economic uncertainty. Agriculture is among the sectors most exposed to the shock, with around 91 per cent of agricultural employment located in countries where the sector faces medium or high levels of exposure.

The impact on the tourism sector has so far been uneven. While most destinations with data available through April 2026 are experiencing significant declines in visitor arrivals, including Sri Lanka and the Maldives, where arrivals were by around 22 and 26 per cent respectively lower than a year earlier, Viet Nam and Indonesia continued to record positive year-on-year growth, supported mainly by strong demand from regional source markets. This suggests that the crisis is not affecting tourism-dependent economies symmetrically, although higher fuel costs and aviation disruptions remain a downside risk if they prove to be persistent.

For labour markets, these developments matter because tourism supports employment across accommodation and food services, retail trade, transport and a wide range of informal activities. In several tourism-dependent economies in the region, the tourism sector accounts for a substantial share of employment, including around 12 per cent in Fiji and Thailand and around 8 per cent in Sri Lanka. Sustained declines in visitor arrivals could therefore translate into lower earnings, reduced working hours and weaker employment prospects for many workers and small businesses.

Number of tourist arrivals, April 2026 (year-on-year growth, percentage)

Labour migration is another important pathway through which the crisis is affecting some countries in Asia. For decades, overseas employment in Gulf countries has been an important source of jobs and income for workers from South and Southeast Asia. As a result of the crisis, several countries have reported sharp declines in migrant worker deployments to Gulf economies. In the Philippines, deployments to GCC countries were around 78 per cent lower in March 2026 than a year earlier. Bangladesh, Nepal and Pakistan also recorded substantial declines. The sharp reduction in new deployments suggests that labour migration may be among the earliest and most prominent channels through which the crisis is affecting the region’s labour markets.

In addition, a prolonged slowdown in recruitment or deterioration in labour market conditions in destination countries would eventually reduce remittances, which is a key source of household incomes in many Asian countries. For labour-sending countries across South and Southeast Asia, fewer overseas job opportunities can quickly translate into weaker household incomes and reduced spending in local communities.

Change in migrant worker outflows from selected countries of origin to GCC countries (year-on-year growth)

As policymakers across the region respond to the crisis, a clear jobs lens is essential. Around 24 per cent of informal workers in the region are employed in highly exposed activities, compared with 17 per cent of formal workers, highlighting the risks facing those with the lowest level of protection. Given limited fiscal space and rising debt levels in many countries, support for micro, small and medium-sized enterprises (MSMEs), protection for informal and low-paid workers, assistance for migrant workers and their families and stronger social protection systems needs to be carefully targeted. These measures can help prevent a temporary external shock from becoming a longer-lasting setback for jobs, incomes and decent work, particularly for the poorest and most vulnerable.

This blog was developed with contributions from the following ILO staff members: Christian Viegelahn, Nilim Baruah, Anthea Bicakcioglu, Roger Gomis, Aya Jaafar, Stefan Kühn, Catherine Laws, Sangheon Lee, Miguel Sanchez-Martinez, Amal Mowafy, Ken Chamuva Shawa and Sher Verick.