Arun Rai, a resident of Dharan, is waiting for a call from an Abu Dhabi-based five-star hotel, where he worked as a chef. The hotel sent him home on unpaid leave in March, promising to call him back after three or four months. Nearly seven months later, he is still waiting.

The hotel sent Rai home days after the US and Israel began strikes on Iran on February 28, as the conflict began to hit the Gulf economy and its tourism and hospitality industries.

“The number of guests dropped sharply and the hotel reduced its staff to just 20 percent,” Rai said. “They sent the rest of us home, saying they might call us back in three or four months.”

He said he was losing about 7,000 dirhams, or roughly Rs300,000, in wages every month. Rai said he has a job currently, but he is not being paid. “I can’t take another job because the company hasn’t told me I’m out,” he said. “My visa expires in a month. I don’t know whether they’ll call me back.” The company’s human resources department has told him to keep waiting.

The conflict has put the Gulf economy and labour market under strain, threatening jobs held by migrant workers from Nepal and other countries. Nearly 60 percent of Nepalis working abroad, or about 1.9 million, are in the Persian Gulf, according to Nepal’s foreign ministry. The government has no reliable figures on how many Nepalis have lost their jobs or returned home on unpaid leave since the conflict began. But data from the Department of Foreign Employment show that the number of Nepalis receiving new labour approvals for Gulf jobs fell by 52.12 percent between the start of the war and mid-September, compared with the same period a year earlier—from 228,165 approvals to 109,249.

With limited job opportunities at home and a large gap between domestic and overseas wages, a slowdown in foreign employment is likely to put further pressure on Nepal’s labour market.

Gulf economies depend heavily on international trade, energy, construction and investment, said Naradnath Bhardwaj, a former ambassador to Qatar, all of which are vulnerable to prolonged disruption.

“The war and disruptions to oil supplies are already hurting the region,” he said. “When companies come under financial pressure, they first stop hiring. Then they cut overtime, followed by temporary and lower-skilled workers.”

The sharpest decline in demand for Nepali workers has been recorded in the UAE, where new recruitment has fallen 59.05 percent. Saudi Arabia has seen a 57.02 percent decline, Kuwait 42.93 percent, Bahrain 45.49 percent and Qatar 35.08 percent. Oman, which has been less affected by the conflict, has recorded a 24.33 percent increase in new recruitment.

Nabaraj KC, chief manager of Paradise International Pvt Ltd, which has supplied workers to more than 2,000 employers across the Gulf, said the region’s labour market had contracted since the war began.

“We haven’t seen new investors putting more money into projects,” KC told Kantipur. “Without new projects, there is little new demand for workers. For the limited openings available, we have to compete with manpower agencies from across Africa and India to bring jobs to Nepalis.”

The number of Nepalis leaving for foreign employment may not appear to have fallen sharply because many workers are renewing their labour permits and returning to their existing employers. But even permit renewals have slowed compared with previous years. Renewals remain relatively stable in the three biggest destinations, Saudi Arabia, the UAE and Qatar.

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Shankar Lal Shrestha, 55, from Pokhara, returned to Nepal in June after the supply company he had worked for in Qatar for six years shut down due to the war. He earned about Rs50,000 a month. “I left without my gratuity, and the company still owes me wages,” he said.

He is now looking for work in Pokhara. “There are simply no jobs,” he said. “Even when you find one, there is no continuity… I am thinking of going to Birgunj.”

A report by the United Nations Development Programme says the Gulf labour market is under significant pressure, with the risk rising the longer the crisis continues. The report estimates that if the disruption persists, unemployment among low-skilled workers in construction, services, transport, hotels and other labour-intensive sectors could rise by 3 to 4.5 percentage points.

The World Bank projected in the first week of April that economic growth across Gulf countries would slow to 1.3 percent in 2026 from 4.4 percent in 2025. The bank has not publicly revised that forecast.

Ousmane Dione, the World Bank’s vice president for the Middle East, North Africa, Afghanistan and Pakistan region, has warned that the effects could become more severe if the war drags on. The World Bank has identified rising energy and food prices, weaker trade and tourism, lower remittances, greater fiscal pressure on governments and population displacement as risks that could deepen.

Saudi Arabia is also under heightened security pressure after Yemen’s Iran-backed Houthi rebels have stepped up attacks on the kingdom. The attacks have affected areas including Riyadh, Jeddah and Mecca. According to Reuters, a drone attack on Saudi Arabia’s East-West oil pipeline disrupted oil transport and raised concerns about the impact on global supplies. The Neom and Red Sea projects, which employ thousands of Nepalis, have also been affected.

The economy of another Gulf state, the UAE, is less dependent on oil than those of others in the region and relies heavily on trade, ports, aviation, tourism and financial services. As shipping through the Strait of Hormuz has been disrupted, UAE companies including Abu Dhabi National Oil Company have begun using alternative transport routes.

Qatar, meanwhile, has lost about $24 billion in gas sales since the war began, according to a Reuters calculation based on 2025 economic data. That is roughly equivalent to five months of Qatar’s national revenue. The country’s gross domestic product fell 7 percent in the first quarter, while energy output contracted by 25.8 percent.

At a special edition of the Qatar Economic Forum in New York on Sunday, Qatari Prime Minister Sheikh Mohammed bin Abdulrahman bin Jassim Al Thani announced the creation of a new unit under the Qatar Investment Authority (QIA) focused on developing domestic investment.

The QIA, Qatar’s sovereign wealth fund, has long focused on expanding its assets and investments abroad. “We want to expand the role of the private sector in Qatar’s economic growth,” he said at the forum. “The [new] unit will help strengthen major companies, support emerging businesses to expand, deepen capital markets and attract international investment and expertise.”

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The International Labour Organisation says job losses will not be evenly distributed across the Gulf economies and has identified sectors where employment is particularly vulnerable. The ILO says about 40 percent of workers in the Gulf are employed in sectors at high risk of job cuts. Wholesale and retail trade accounts for the largest share at 17 percent, followed by construction at 14 percent, manufacturing and agriculture at 8 percent each, and transport and storage at 6 percent. Accommodation and food services are also among the sectors considered vulnerable. These sectors are particularly exposed to rising costs, weaker demand and disruptions to movement and transport, the ILO said. They also account for a large share of Nepali workers heading to the Gulf.

Nepal’s 2021 census counted 15.7 million people, or 65.5 percent of the population, as economically active or part of the labour force. Of them, 8.2 million were men and 7.5 million women. The largest economically active age group was people aged 25 to 29, numbering about 1.9 million. Another 1.8 million were aged 20 to 24, while 1.78 million were aged 35 to 39. These workers between the ages of 20 and 39 make up a highly productive segment of the workforce, yet many continue to look overseas for stable and decent-paying jobs.

According to the Ministry of Youth, Labour and Employment, more than 745,000 unemployed people have registered to date at employment service centres established in 746 local units last fiscal year. Nepal has limited capacity to absorb them into the domestic labour market.

Employment expert Youb Raj Basnet said young people with education and skills who could contribute to economic transformation were being pushed overseas because they could not find productive jobs at home.

“Growing frustration among young people is driven not just by politics, but by the economic crisis and lack of jobs,” he said. “Unemployment is eroding trust in the state, fuelling doubts about the government and deepening a sense of rebellion among the younger generation.

A report released by the ILO in August, ‘Global Employment Trends for Youth 2026: Back to the Future’, said sluggish global economic growth and weak job creation were making it harder for young people to enter the labour market. The report also highlighted the link between limited employment opportunities and growing social discontent. It said Gen Z protests in Kenya in 2024 and 2025 were driven by a lack of jobs, corruption and political institutions failing to meet young people’s expectations. The report said Bangladesh, Nepal and Sri Lanka had experienced similar pressures. “In these countries,” the report said, “dissatisfaction over the lack of jobs and decent work opportunities has also translated into political upheaval.”

Nepal’s government has yet to bring programmes capable of creating jobs on a scale large enough to absorb the growing workforce.

The question is how much capacity the country has to employ young people returning from abroad or unable to leave if demand for Nepali workers overseas continues to weaken.

Labour officials are preparing a programme to help Nepalis returning from foreign employment find jobs in the domestic market, Labour Ministry spokesperson Mira Acharya said.

“The government has prioritised promoting employment at home,” Acharya said. “We are preparing a 10-year employment programme. A programme targeting workers returning from abroad could be introduced this year.”

The government is also working to better match workers’ skills with labour-market demand and create more productive jobs at home, she said.

The World Bank estimates that about 500,000 young Nepalis enter the labour market every year. But gaps between skills, productivity and labour-market demand mean the education system is not adequately preparing them for employment. Nepal has employment service centres, public employment schemes, skills training and entrepreneurship programmes, and initiatives to connect workers with employers. But their institutional capacity, coordination among federal, provincial and local governments, data systems and ability to respond to employers’ needs still need to be strengthened.

Binod Shrestha, president of the Joint Trade Union Coordination Centre, said inadequate wages and the lack of social security remained major problems. “Workers returning from abroad have no reliable way to have their skills assessed, so even skilled workers are often classified as unskilled,” he said. “At the same time, the domestic labour market has little capacity to use those skills. The bigger challenge is finding them jobs that pay a decent wage.”

Seven months into the Gulf conflict, Nepal’s remittance inflows have yet to take a hit, even as the number of Nepalis leaving for foreign employment has fallen. Nepal received Rs2.363 trillion in remittances in the 2025–26 fiscal year, up 37.1 percent from the previous year. According to Nepal Rastra Bank, remittance inflows had risen 21.2 percent to Rs215 billion by mid-August.

A total of 406,519 Nepalis received final labour approval for foreign employment last fiscal year, including first-time approvals for institutional and individual recruitment. Another 385,783 received renewed labour permits. First-time approvals declined by nearly 100,000 from the previous year, while renewals rose by more than 52,000.

According to Nepal Rastra Bank, 40–45 percent of Nepal’s remittances come from the Gulf. The central bank’s spokesperson, Guru Prasad Paudel, said a decline in the number of workers leaving for the Gulf would not immediately affect remittances.

“If fewer workers are leaving now, the impact will not be felt immediately,” he said. “The money comes from workers who left six months earlier.”

Improved financial literacy and easier access to financial services have also encouraged workers to send more money through formal channels, Paudel said.

“People may have become more financially aware of the benefits of sending remittances through formal channels rather than through hundi,” he said.

But, the World Bank has warned that the current resilience may not last if demand for migrant workers in the Gulf remains weak for an extended period. Some 77.3 percent of Nepali migrant workers are employed in Gulf countries. A prolonged conflict could affect remittance income if it reduces demand for workers or disrupts their employment, the bank said.

Dione, of the World Bank, said the current crisis is a stark reminder of the work that still needs to be done in the region. “It is not enough simply to withstand crises,” he said. “What is needed is a more resilient economy built on stronger economic foundations, innovation, good governance, investment in infrastructure and the creation of jobs.”