Europe's Luxury Stocks Sink on Middle East Conflict

By Andrea Figueras

Shares in European luxury-goods makers fall amid military escalation in the Middle East, adding a fresh challenge to an industry already struggling to gain momentum.

The broad selloff came after Iran launched retaliatory attacks in response to U.S. and Israeli strikes. Iranian forces attacked U.S. allies in the region, with missile strikes hitting countries including the United Arab Emirates, Bahrain and Qatar.

The gulf region is an important revenue center for luxury goods, with wealthy locals and tourists drawn to the glitzy shopping centers of the UAE's Abu Dhabi and Dubai. Indeed, many brands' largest store by revenue is now in Dubai, said Luca Solca, a luxury analyst at brokerage Bernstein. The wider Gulf has risen to be as important for the industry as Japan, accounting for around 7% to 8% of global luxury spending, he said.

A protracted war "would dent discretionary spend globally and usher in a more subdued luxury goods growth scenario," Solca said.

As of Monday morning, all flights to and from Dubai's international airports were suspended. Airspace across the Emirates and Qatar was closed, and the region's airlines said they were suspending all flights.

Luxury's largest player LVMH, the French group that houses a host of brands including Louis Vuitton and Dior, dropped 3.7% in European morning trading. Birkin-bag maker Hermes and Gucci-owner Kering fell more than 3%, while Italian rivals Brunello Cucinelli and Salvatore Ferragamo slid 3.6% and 3.1%, respectively. Swiss groups Richemont, which owns Cartier, and watchmaker Swatch Group traded more than 5% lower, while eyecare giant EssilorLuxottica, British group Burberry and Milan-listed Moncler also saw their shares slide.

The attacks on Dubai, and a subsequent curfew in the emirate, could squeeze revenue in the most vital market in the region, RBC Capital Markets' Piral Dadhania wrote in a note to investors. The impact could moreover spill into Europe, he said, noting the timing of the attack in the middle of the Ramadan.

"There may be a reluctance for Middle East consumers to travel post-Ramadan in 2026, which would likely negatively impact a portion of luxury consumption in Europe," Dadhania said.

The situation in the Middle East adds new pressure to the beleaguered luxury sector. Firms have had to contend with lagging demand for high-end goods, particularly in China, as well as geopolitical turmoil, trade tensions and an uncertain global economic landscape that have weighed on sales and dragged share prices downward.

Military conflict in the Middle East stokes the uncertainty buffeting luxury, Vontobel analyst Jean-Philippe Bertschy wrote.

Beyond direct sales in the region, the immediate disruption from cancelled flights and rerouted traffic risks weighing on global tourism, which accounts for roughly one third of luxury-goods consumption, Bertschy said.

"The main challenge at this stage is that both the duration and breadth of the conflict are impossible to predict, which means any attempt to quantify the impact remains highly uncertain," he said.

A spokesperson for Swatch Group said that the company is closely following the situation.

"Everybody is of course concerned by the recent developments. However, we have no damage. Nobody has been hurt and our stores have not been affected," the spokesperson said.

Write to Andrea Figueras at andrea.figueras@wsj.com

(END) Dow Jones Newswires

March 02, 2026 05:46 ET (10:46 GMT)