Iran war hits Indian jobs, remittances and exports as Gulf hiring slows

The war in the Middle East is putting pressure on two major sources of Indian employment, forcing Gulf-based workers to return home and weakening demand for the country’s manufactured exports, including leather goods and glassware.

For decades, employment in the Middle East and global demand for labour-intensive manufacturing sectors such as footwear and garments provided stable incomes for millions of Indians.

Now, the foreign conflict has dealt a double impact on the economy, with returning migrant workers unable to find similar-paying jobs in their hometowns, increasing concerns over unemployment and the risk of social unrest.

Until January, Mohammad Qureshi worked at a jewellery shop in Saudi Arabia, earning about 30,000 rupees ($311) a month. He saved enough money to build a small home and contribute towards his sister’s wedding.

Now, the 32-year-old earns barely a third of that amount while working at his cousins’ tea stall in Kanpur after the Iran war disrupted his plans to return to the Middle East. He currently lives with his mother and elder sister and is waiting for an opportunity to go back to work in the Gulf.

“Life in Saudi was easy and the money was good,” Qureshi said while standing beside his cousins as customers gathered for tea. “Life is difficult here. I pray the war ends soon so we can go back.”

India’s economy is still growing at nearly 7 per cent and urban unemployment stands at 6.6 per cent. However, economists and recruiters have warned about weak hiring, slow wage growth and worsening job quality for the 6 to 7 million young Indians entering the workforce every year.

They say the pressure could weaken consumption and trigger unrest similar to protests seen in north India last month.

The impact is becoming visible in industrial centres such as Kanpur in Uttar Pradesh, India’s most populous state.

At Kings International, a leather factory supplying saddlery overseas and sports goods to Decathlon, owner Taj Alam said the Middle East conflict had pushed up fuel, gas, logistics and shipping costs while demand remained weak.

Alam said his factory, which can process 200 hides a day and once employed more than 500 workers, is now operating at about half capacity with roughly half its earlier workforce. He said there was little incentive to expand or hire more workers.

“The outlook will remain bleak until the Strait of Hormuz stabilises,” he said. “Why invest when the future looks uncertain?”

Kanpur accounts for around a quarter of India’s $6 billion annual leather exports and directly or indirectly employs about 500,000 people, according to Mukhtarul Amin, vice chairman of the Council for Leather Exports.

He said businesses in the sector remained cautious on hiring and investment even as they attempted to retain workers and avoid layoffs.

Gulf jobs under pressure

Of the nearly 19 million Indians working overseas, around 9 million are based in the Gulf region.

World Bank estimates show economic growth in the Gulf slowing to 1.3 per cent in 2026 from 4.4 per cent in 2025, increasing concerns over employment prospects.

Recruiters said hiring had become more uncertain following the U.S.-Israeli strikes on Iran, with employers delaying recruitment and families becoming hesitant to spend money on migration costs.

At Hayat Placement Services in Kanpur, recruiter Gautam Bhatnagar said opportunities had reduced both within India and abroad.

“Earlier, we used to place five to 10 candidates every month,” he said. “Now we are lucky if we can place even one or two.”

There are no official figures on the number of Indian workers who have left the Gulf.

However, a foreign ministry official told reporters last month that around 1.1 million Indians, including passengers, workers and other travellers, had returned from the region between the start of hostilities on February 28 and the end of April. The ministry did not respond to later queries.

The uncertainty is also affecting Kerala, where Gulf remittances have long played a major role in the state economy.

Thomas Cherian, 50, worked for 18 years at a construction firm in Saudi Arabia before returning home on leave in December. He was scheduled to return in March, but said the company halted its project and laid off about 600 Indian workers.

If he is unable to return by the end of June, his visa will expire.

“There has been no mass return so far,” said Ajith Kolassery, CEO of NORKA Roots, an agency under Kerala’s Non-Resident Keralites Affairs Department.

“But if the conflict continues, financial stress in Gulf economies could lead to large-scale repatriation, adding pressure to Kerala’s already strained job market.”

Remittances from overseas Indians stood at $102.5 billion during April-December 2025, compared with $92.4 billion during the same period a year earlier. Data for January-March has not yet been released.

The Reserve Bank of India did not respond to queries regarding the impact of the Iran war on remittances.

Multiple pressures across the labour market

For prime minister Narendra Modi and his government, the concerns extend beyond economic growth.

India has nearly 400 million people aged between 15 and 29, and creating non-farm jobs remains one of the country’s biggest challenges despite rapid economic expansion.

“This is not just a cyclical slowdown,” said KE Raghunathan, national chairman of the Association of Indian Entrepreneurs. “AI, weak global trade and tighter migration conditions are narrowing traditional employment avenues across manufacturing, IT and overseas labour.”

India’s unemployment rate rose to 5.2 per cent in April from 4.9 per cent in February, while urban youth unemployment remains close to 14 per cent.

Economists have also pointed to persistent underemployment, with many educated young people working in low-paid or insecure jobs that do not match their qualifications.

Ram Singh, an economist at the state-run Indian Institute of Foreign Trade, said weaker Gulf job prospects, export uncertainty and rising costs were likely to affect hiring across manufacturing, logistics and trade-linked sectors.

“The bigger worry is weaker wage growth, especially in low-skill and routine white-collar functions vulnerable to AI-automation,” he said. “With a surplus labour market and firms seeking flexibility, this could mean more contractual, gig and informal work.”

(With inputs from Reuters)