A version of this article first appeared in CNBC’s Inside Wealth newsletter with Robert Frank, a weekly guide for wealthy investors and consumers. Register to receive future editions, straight to your inbox.
Major stocks in the luxury sector have fallen 15% or more since the start of the war in Iran, and sales in the increasingly important Middle East market could fall by half, analysts say.
Actions of LVMH And Hermes are down about 16% and 20%, respectively, this month, while S&P500 fell less than 6%. Actions of Ferrari are also down 15%, and the company announced it would temporarily suspend deliveries to the Middle East. Bentley, Maserati and other premium automakers are also halting deliveries due to security and logistics risks.
“At the moment we don’t have an impact on the production side,” Bentley CEO Frank-Steffen Walliser said of the company’s recent investor call. “But certainly people in the Middle East have other thoughts than looking for a new Bentley at the moment.”
For luxury investors and companies, the war in Iran has highlighted the growing importance of the Middle East to the global luxury industry and the economy of the rich. Although the region accounts for a relatively small share of overall luxury sales, its growth has become critical to the industry.
The region was the fastest-growing luxury market in the world last year, growing between 6% and 8% compared to stagnant growth globally, according to Luca Solca, luxury analyst at Bernstein. The Middle East now accounts for about 6% of global luxury sales, poised to potentially rival Japan, which claims about 9% of global sales, according to Solca.
Dubai in the United Arab Emirates has been the main driver of growth, accounting for around 80% of growth in the UAE, which itself accounts for more than half of luxury growth in the region as a whole, according to research by Morgan Stanley.
The unrest in the Middle East comes at a critical time for the luxury industry. After two years of stagnant sales, the industry was betting on a recovery in 2026. The Chinese market is showing slight improvements in sales after years of decline. The U.S. luxury consumer remains strong, thanks to growing wealth from artificial intelligence and stock markets. And Europe remained stable, helped in part by tourism spending.
A research note from UBS luxury analyst Zuzanna Pusz and her teams says luxury investor sentiment is “the most pessimistic in years.” While investors were betting on a rebound at the start of the year, “increased geopolitical uncertainty risks weighing on near-term profits and delaying the long-awaited turnaround in fundamentals.”
Stock price movements have already wiped out about $100 billion in market capitalization of major luxury companies, with LVMH and Hermès each losing more than $40 billion in value.
Solca said that if sales in the Middle East fell by half in March, which he described as a worst-case scenario, quarterly growth would fall by around 1 percentage point for many luxury companies.
However, he said the decline could be more moderate. Even though the region’s stores and malls are largely empty, many luxury companies continue to make sales by reaching out to top customers one-on-one and delivering their products to their homes. Solca also said the wealthy who left Dubai could continue to spend on luxury goods in other countries.
“Most of the companies we’ve talked to don’t really point to a disastrous decline in the Middle East,” Solca said. “Ultimately, if this was limited to the month of March, it would largely be a non-event.”
Other factors that have contributed to Dubai’s recent success – no income tax, stable governments, sunny beaches – remain intact. The city’s millionaire population has doubled since 2014 to more than 81,000 people, according to Henley & Partners. An estimated 9,800 millionaires moved to Dubai in 2025, bringing $63 billion in wealth, more than any other country in the world, according to Henley. Most of Dubai’s wealthy come from the United Kingdom, China, India and other parts of Europe and Asia.
Yet Dubai’s reputation for safety and security has been shaken. The Middle East’s luxury market relies heavily on wealthy tourists, who may avoid the region long after a possible ceasefire.
According to Morgan Stanley, around 60% of luxury spending in the UAE comes from tourists, of which 60% are visitors from Russia, Saudi Arabia, China and India. Of the remaining 40% spent by UAE residents, around half comes from foreign UAE residents, who may also change their plans to stay in the region long-term.
Rising oil prices could also weigh on sales of luxury goods. Analysts say aspirational luxury consumers, more sensitive to inflation and economic downturns, may cut spending due to rising gas prices and food prices. At the same time, wealthy consumers could be spooked by stock market volatility. Since the spending of the wealthy depends more on stock markets and the so-called wealth effect, a decline or even stagnation in stocks could cause a pullback.
“A rise in oil prices could lead to a downward adjustment in global stock markets and that would be very bad,” Solca said. “Consumer confidence among stock-rich people would be damaged.”