Impact of the Iraq Invasion of Kuwait on Foreign Migrants in the Region
The 1990–1991 Gulf crisis revealed South Asia’s structural dependence on remittances from the Gulf Cooperation Council (GCC) and the risks of limited diversification in migration destinations. Iraq’s invasion of Kuwait triggered a major disruption for migrant workers. Around 1.5 million fled to Jordan, including 860,000 Asians, while many others were stranded due to airspace closures. India managed to evacuate approximately 170,000 of its own workers. Remittance flows collapsed, with countries such as Egypt losing an estimated USD 2 billion, highlighting the vulnerability of remittance-dependent economies. A US-led intervention under UN Security Council Resolution 678 and a 42-day military campaign, liberated Kuwait and brought back, predictability, if not peace.
Today’s War is Impacting the Seven GCC Countries Simultaneously
The stakes today are significantly higher than in previous conflicts. Unlike in 1990, when hostilities were limited to two countries, the current war involves all seven GCC nations, which collectively represent roughly 2% of global GDP. The United States and Israel initiated this conflict without a clear multilateral mandate or defined objectives, raising the risk of a prolonged and widespread crisis that could extend far beyond the region.
This escalation has serious economic implications. Ongoing military actions threaten access to 32.7% of the world’s proven oil reserves and 21.2% of natural gas reserves, which could severely disrupt global energy markets. South Asia, in particular, is highly vulnerable, as it depends heavily on oil and gas imports from the Gulf states. Nearly 80% of liquefied natural gas (LNG) exports from the United Arab Emirates (UAE) and Qatar are destined for Asian markets, linking regional instability directly to energy security in developing economies. The economic fallout may extend beyond energy markets. The United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) warn that growth across developing Asia-Pacific economies could slow to around 4.0% in 2026, down from 4.6% in 2025. Rising poverty, food insecurity, and inequality may follow, alongside job losses and the potential displacement of migrant workers. In this way, the regional conflict is not just a geopolitical concern, it poses a broader socioeconomic threat that could ripple across continents.
Risks to Gulf Investments and Economic Transformation
Up to USD 2.3 trillion in ongoing investments, anchored in Saudi Arabia’s Vision 2030 and the UAE’s Economic Vision 2050, are at risk. The region’s broader shift away from oil dependence could stall. The UAE, for instance, was heavily investing in tourism and aviation. The ongoing war is hurting these two sectors and the real estate market, while high-profile infrastructure, including Dubai Airport’s expansion, faces delays due to the recent bombings of the airport. Qatar’s USD 28.7 billion North Field Expansion is likewise vulnerable to delay as instability persists.
Out of 31 Million Migrants in the Gulf, 75% are from South Asia
The Gulf hosts about 35 million foreign nationals, roughly 75% from South Asia. In 2024/2025, remittances from the GCC to South Asia reached approximately USD 98 billion, around three times the region’s net FDI inflows. India receives about USD 50 billion annually from the Gulf, while Pakistan and Bangladesh receive USD 21 billion and USD 14 billion respectively. Nepal and Sri Lanka are even more dependent, with the Gulf accounting for up to 95% of total remittances.
Labour Migration Vulnerabilities
Foreign workers account for roughly 55% of the GCC population, up to 87% in Qatar and 77% in the UAE, and are concentrated in oil, construction, tourism, and services. The conflict is already disrupting these sectors, with falling tourism and flight interruptions as early indicators. A prolonged downturn would likely bring layoffs, hire freezes, and delay or reduced wages, as seen during COVID-19 directly impacting the 21 million labour migrants in the region.
Socioeconomic Consequences for South Asia
A prolonged conflict would therefore have severe repercussions for both Gulf economies and the approximately 23 million South Asian migrants in the region. Most critically, it would disrupt the 98 billion remittance flows that sustain millions of households, increasing poverty and weakening foreign exchange reserves, fiscal balances, and external accounts. At the same time, return migration and reduced labour demand would exacerbate unemployment and underemployment in origin countries. Beyond economics, migration acts as a socioeconomic safety valve in many South Asian countries. Its disruption could heighten social tensions, deepen inequality, and, in some cases, undermine political stability.
Short-Term Dynamics in Remittances
The effects on remittances may, however, be mixed in the short term. As during COVID-19, flows can initially increase as migrants draw on savings to support households. In addition, South Asian diasporas in higher-income countries such as Australia, the United Kingdom, and Canada may partially offset declines in Gulf-based remittances. A long-lasting conflict though will have disruptive impact on the remittance flow and the economic models base on migration in both the Gulf and South Asia.
Europe as a Potential New Destination
The European Union (EU) is undergoing a demographic shift as an aging population and retiring workforce are reducing the available labour pool, with projections suggesting a loss of 1 million workers annually until 2050. In 2024, more than 4.6 million non-EU citizens obtained the right to both reside and work in the EU through the single permit administrative procedure. Under its Blue Card Scheme, 78,100 highly qualified non-EU workers received an EU Blue Card. Authorisations for study and research purposes were granted to 475,000 non-EU citizens.
Over the longer term, sustained instability could redirect migration toward more stable destinations, particularly in Europe, with lasting implications for global migration patterns and the geography of remittance flows.
Giuseppe Savino is the founder of Migration Protocol, a consultancy firm specializing in labor migration policy. After over thirty years in investment banking, he shifted focus in 2014 to address challenges in migrant recruitment and reduce migration costs through financial innovation. He has worked with UKAid Nepal, the International Organization for Migration in Nepal and Bangladesh, and other key stakeholders, advising on regulatory reform, remittance use, and migrant reintegration across South Asia.
