When the U.S.-Israel war against Iran shakes the Gulf, India’s Kerala state feels the shock

Jobs, remittances, and stability are under strain as the Middle East war reverberates across Kerala households.

By P. Sudhakaran

The Indian state of Kerala was part of a global economy long before the word “globalization” came into use. It welcomed traders, travelers, and cultures from across the world. Over time, that outward gaze turned into migration, from Sri Lanka to Persia to Malaysia and beyond. Wherever one looks, there is a Malayali presence. Gradually, this movement of people shaped the state into a remittance-driven economy.

With the Gulf boom, this migration deepened and took a more defined direction. Kerala came to live with an invisible extension of itself stretching across Middle East. From construction sites in Dubai to hospitals in Israel, from oil facilities in Saudi Arabia to service sectors across the region, Malayalis built lives abroad, and in doing so, sustained the economy back home.

Today, as war engulfs large parts of Middle East, that extended geography is under strain. What is unfolding is not a distant geopolitical event, but something that is being felt within homes across Kerala, as anxiety, as economic unease, and as a growing sense of uncertainty.

Migration experts have described the present conflict as the most severe crisis faced by migrant workers in the last fifty years. It is more disruptive than the Gulf War, the global financial crisis, or even the COVID-19 pandemic. What makes this moment different is not just the intensity of the conflict, but the way it has unsettled an entire region that people depended on for stability and livelihood.

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At the heart of Kerala’s vulnerability lies its deep dependence on remittances. According to the Kerala Migration Survey (2023), the state received a record $23.4 billion (₹216,893 crores, or ₹2.16893 trillion) in remittances, an increase of over 150% since 2018. These are not just supplementary earnings; they support everyday life, including education, healthcare, housing, and consumption across districts.

Now, with the ongoing conflict, there are warnings of a possible 20% drop in remittances. That could translate to a loss of roughly $5.39 billion (₹50,000 crore, or ₹500 billion ). For a state where one in four families is connected to migration, this is not just a numerical decline, but a structural shock.

With over 2.2 million Malayalis living abroad, and nearly 90% of them in the Gulf, Kerala’s economic and social life remains closely tied to the Middle East. Of the roughly 10 million Indians working in the Gulf, one in five is a Malayali. This level of concentration makes Kerala particularly exposed. Few places are so closely linked to a single external region.

The early signs are, in a way, misleading. In the first weeks of the conflict, remittances actually rose, as expatriates hurried to send their savings home. But this is not a sign of strength, it reflects fear. People are sending money because they are unsure whether they will be able to send it later.

If remittances fall over time, the impact will spread quickly. Sectors such as real estate, retail, and gold, long supported by Gulf earnings, may slow down. Consumption, which drives much of Kerala’s economy, could weaken. Even the banking system, especially cooperative banks that rely heavily on deposits linked to remittances, may come under pressure.

As migration expert S. Irudaya Rajan has often pointed out, there is a mutual dependence: Gulf economies rely on migrant labour, while Kerala depends on the income that labour generates.

When one side weakens, the other inevitably feels it.

READ: As remittances to India touch $100 billion, diaspora puts its money where its mouth is (December 29, 2022)

The effects are already visible in the Middle East. Sectors that employ large numbers of Indian workers, including construction, services, and oil-linked industries, are under stress. Projects are slowing down, supply chains are disrupted, and companies are becoming cautious. Job security, once taken for granted, is now uncertain.

What makes this situation more serious than earlier conflicts is its scale. Previous wars in the region were largely confined to specific countries. This time, the impact is spread across multiple nations, including the Gulf Cooperation Council countries that host millions of Indian workers. Earlier, unaffected economies within the region could absorb some of the shock. That cushion is now missing.

The consequences are immediate. There are reports of job losses, salary cuts, and hiring freezes. Return migration, though still limited, has begun to appear as a possibility. Workers who lose jobs or feel unsafe may come back, placing additional pressure on Kerala’s already limited job market. The state does not have the capacity to absorb large numbers of returning migrants into stable employment.

There is also a deeper, less visible shift taking place. For decades, the Gulf was seen as a place of stability and opportunity, a dependable destination. That sense of security is now shaken. For many workers, the fear is no longer just about employment, but about safety and unpredictability.

Nurses and vulnerable workers

Among those most exposed are healthcare workers, especially nurses from Kerala. Thousands of Malayali nurses and caregivers work in Israel and other parts of the region, forming an essential part of the healthcare system there.

Recent reports point to rising risks. Air raids and missile alerts have created a climate of anxiety. In Iran, there are instances of Keralite nurses being stranded as the situation worsens.
These are not isolated incidents. They reflect the vulnerability of workers who are tied to essential services. Nurses cannot easily step away from their duties, even when the environment around them becomes unstable. Their work keeps them in places that can quickly turn into conflict zones. Also, In Israel, there is kind of an iron curtain that hides the exact state of affairs.

What stands out in this crisis is the level of psychological stress. The Gulf was rarely associated with fear. Today, workers are thinking not just about jobs, but about safety, evacuation, and what tomorrow might bring. This shift could influence migration patterns in the long run.

The impact is not limited to those abroad. It extends to migrant labourers from northern India who depend on Kerala for work. If remittances fall and economic activity slows, demand for labour within Kerala will also decline. For many of these workers, who often see Kerala as their own “Gulf”, this could mean job losses and fresh uncertainty.

The crisis is also an energy crisis, and its effects are being felt far beyond the region. A large share of India’s crude oil, LPG, and LNG imports passes through the Strait of Hormuz, which is now under threat. This has already pushed up global oil prices.

For Kerala, this means rising fuel costs and a higher cost of living. LPG, now a basic household fuel, is particularly vulnerable because of high import dependence and limited storage. Any disruption could lead to shortages and price increases. The impact is already visible, with hotels and small eateries feeling the strain, and some even forced to down their shutters as operating costs rise and supplies become uncertain.

The effects spread across sectors. Higher fuel prices increase transport costs, which in turn raise the prices of essential goods. Agriculture, construction, and small businesses all feel the pressure. For lower-income households, the combination of reduced remittances and rising expenses could be especially difficult.

Tourism is also affected. Travel disruptions, higher costs, and global uncertainty have led to cancellations and fewer visitors. Maritime trade is facing its own challenges, with higher insurance costs and disruptions to shipping.

For Kerala, the Gulf is not a distant place, it is woven into daily life. Entire local economies, particularly in the northern districts have grown around migration and remittance flows.

This crisis has made that connection visible in a new way. Families are not only worried about income, but about safety. Parents wait for calls from children abroad. Plans are postponed. Certainty gives way to hesitation. What is unfolding is not just an economic slowdown, but a shared social anxiety.

The political impact is also becoming evident. With elections approaching, the crisis has entered public debate, raising questions about evacuation, support systems, and the government’s response.

At the same time, practical limitations remain, as state governments can only address the effects, not shape the larger geopolitical situation. The situation may also influence the election itself. Many expatriate voters could find it difficult to return due to flight disruptions, rising travel costs, and uncertainty in the region. Their absence may affect voter turnout in key constituencies, particularly in districts with strong Gulf links, adding a layer of unpredictability to the outcome.

Time to rethink Kerala’s economic model

If there is one lesson from this moment, it is the need to look inward. Kerala’s reliance on remittances has been a strength, but it has also created a vulnerability. When that flow is disrupted, the effects are immediate.

In the short term, there is a need to support affected families and returning migrants. Employment schemes, financial support, and mental health assistance will be important.

In the long term, the challenge is larger. Kerala must create more opportunities within the state, strengthen its industries and services, and reduce dependence on a single external region. Migration will continue, but it cannot remain the only pillar of the economy.

The war in the Middle East may be far away on the map, but for Kerala, it is close, felt in everyday life. It is there in the silence of halted worksites, in the hesitation of spending, in the anxious wait for news.
At its core, this crisis reveals a fragile interdependence. The Gulf depends on migrant labour; Kerala depends on the income it generates. When that balance is disturbed, the effects travel quickly across borders.

Kerala’s connection with the Gulf has been a story of aspiration and transformation. Today, it is also a story of vulnerability. As the situation continues, the state is left to reflect on how deeply it is tied to a region now in conflict, and what it must do to build a more balanced future.

In Kerala, the Gulf has never been “abroad”. And now, as that region trembles, the shock is felt at home.

(P. Sudhakaran is a journalist, bilingual writer, art critic, and translator from Kerala. He has worked with leading media organizations in India, including The Times of India and The New Indian Express. He is the author of more than fifteen books in English and Malayalam, including original works and translations, and regularly writes for magazines and journals)