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The luxury industry woke up Monday to a crisis it has been dreading since regional tensions began building last year. U.S. and Israeli strikes on Iran over the weekend killed Supreme Leader Ayatollah Ali Khamenei and triggered retaliatory missile and drone attacks across the Gulf, sending shockwaves through an industry that has poured billions into the Middle East and counts the region among its most important growth markets.
Shares in Richemont, the Swiss owner of Cartier, Van Cleef and Arpels and a stable of prestigious watchmakers, slid more than 6% in Zurich Monday morning, making it one of the steepest fallers in the STOXX Europe 600. LVMH dropped more than 3% in Paris, Kering shed around 4.3%, and Swatch Group lost roughly 5%. Hermes, which analysts have long considered the most defensively positioned name in the sector, was down about 4%. Ferrari dipped 3.8% in premarket U.S. trading.
The broad STOXX Europe Luxury 10 index fell close to 4% in early trading, placing it among the biggest sectoral decliners on the continent.
The selloff was not confined to luxury. Hotels, airlines and tourism companies also took heavy hits. Accor fell roughly 9%, TUI slid about 8%, and Lufthansa dropped around 7% as investors priced in the possibility that commercial air travel to and through the region could be disrupted for weeks.
Stores shut, airports closed
On the ground in the Gulf, the damage was immediate and visible. Chalhoub Group, which operates roughly 900 stores across the Middle East carrying brands from Versace and Jimmy Choo to Sephora, said its locations in Bahrain had closed while shops in the UAE, Saudi Arabia and Jordan were running on skeleton crews of voluntary staff. Lynn al-Khatib, the group's vice president of communications, said company leadership visited Dubai Mall and Mall of the Emirates on Monday morning to check on workers.
Kering, the French group that owns Gucci, said its stores were temporarily closed in the UAE, Kuwait, Bahrain and Qatar, and that the company had suspended all business travel to the region.
One of Iran's retaliatory strikes hit Dubai's Fairmont Palm hotel, a five-star property that has been a gathering place for the city's international elite. Dubai International Airport, one of the busiest transit hubs in the world, was also struck. Both Cartier and Richemont declined to comment to reporters on the impact to their operations.
Just days before hostilities broke out, Cartier had unveiled a high-jewellery exhibition at Dubai's Keturah Park. Last month, Louis Vuitton had staged an event at the Jumeirah Marsa Al Arab hotel. The timing underscored how aggressively the industry had committed to the region in the months leading up to the crisis.
Why analysts are worried
In a note published Monday morning, RBC Capital Markets analyst Piral Dadhania laid out several reasons for concern that go well beyond the immediate store closures.
The sharp selloff in equities and flight to safe havens, including U.S. Treasuries, gold, the Swiss franc and the yen, creates what he called a negative wealth effect for the kind of affluent investors who drive luxury consumption. When portfolios shrink, discretionary spending tends to follow.
Dadhania also pointed to the emotional nature of luxury purchasing. Unlike everyday goods, high-end watches, jewelry and fashion are tied to consumer confidence and a sense of optimism about the future. In a period marked by military escalation, casualties and geopolitical shock, that emotional driver is likely to weaken or disappear entirely.
Morgan Stanley analysts estimated that the Middle East accounts for around 5% of sales for most major luxury players. The UAE, and Dubai in particular, makes up the largest single country share within that figure. They noted that spending in the region tends to cluster in the weeks leading up to Eid al-Fitr, which falls this year on March 19 and 20, a period that could now be severely disrupted.
"If you assume that it is a $5 to $6 billion travel retail market and let us say it is going to be shut down for a month, we are talking about hundreds of millions of dollars that are definitely at risk," said Victor Dijon, senior partner at the consultancy Kearney. He added that if Gulf shoppers are unable to travel to Paris or Milan, luxury sales in Europe could take a hit as well.
The Strait of Hormuz factor
Beyond consumption, analysts flagged a logistical dimension that could widen the damage. The Strait of Hormuz is a critical shipping lane for global trade, and any prolonged disruption there would drive up cargo insurance rates, freight costs and reliance on more expensive air freight. Dadhania said that outcome would weigh on gross margins across sporting goods and apparel supply chains, and could eventually ripple into luxury as well.
Brent crude jumped sharply on Monday as tankers were reportedly blocked from passing through the strait. Prices hit around $82 a barrel, with traders factoring in the possibility of sustained supply disruptions.
A sector already under pressure
Monday's selling added to what has already been a difficult stretch for global luxury brands. The industry has been navigating a slowdown in Chinese consumer spending for the better part of two years, and several major names entered 2026 with share prices well below their 2023 peaks.
Richemont's stock is down roughly 13% so far this year. LVMH and Kering have also struggled to regain momentum after a period of weaker Chinese demand, higher interest rates and a broader cooling in the appetite for premium goods.
RBC said it was shifting its preferences toward what it described as more defensive names in the consumer sector, specifically calling out Essilor Luxottica, Nike and Hermes as companies with strong balance sheets and healthy cash flows. The bank said Swatch, Richemont and LVMH faced the greatest direct exposure to the conflict given their established presence across Gulf retail markets.
None of the major luxury houses had issued formal guidance revisions by late Monday morning. The next few days of trading, and the next few days of news from the Gulf, will likely determine whether this week marks a short, sharp correction or the beginning of something harder to shake off.
