As conflict destabilizes parts of the Middle East, the ripple effects are already reaching the region’s luxury economy, which has become a promising growth engine for a struggling global sector.
Since the US and Israeli strikes on Iran, resulting attacks in the region have meant casualties, closed airspace, canceled flights, and warnings for travelers to leave the region. While most luxury companies are declining to comment on the situation at all, even as to whether their stores are open or closed, Dubai Mall, the key location for luxury spending in the Middle East — and where most of the biggest brands, from Alaïa to Gucci to Zegna, have presence — remains open.
In Dubai, a city where shopping is a core social activity, leaders have sought to reassure both residents and visitors that they are safe to carry on as usual; Crown Prince Sheikh Hamdan bin Mohammed Al Maktoum even appeared at the mall last week. In other countries, like Bahrain, more stores were closed following the first attacks. City Center Bahrain, the largest luxury mall in the country, closed temporarily last week, but stores have since reopened.
Chalhoub Group, the leading luxury retailer of the Middle East, which operates more than 950 stores across top brands, says only that its risk and crisis management committee remains “fully activated” as it monitors developments. Its priority, the company says, “is the safety and wellbeing of our people, while maintaining business continuity responsibly and in alignment with local authorities as circumstances evolve”.
Before war broke out, the Middle East was “one of the few growth regions for luxury globally”, says Achim Berg, founder of independent corporate think tank FashionSights. But as can be expected, the current environment isn’t exactly motivating people to shop. “Any disruption we see will not be good for luxury companies.”
The Middle East accounts for an estimated 5% to 6% of global luxury spending, according to Thomas Chauvet, head of luxury goods research at Citi. While the number may seem small in the grand scheme of things, the luxury market is heavily dependent on the region, and some brands more so than others. Richemont derives roughly 9% of its revenue from the Middle East, according to Citi estimates, while Swatch Group, for example, counts on the region for around 10% of its revenue. Shares of luxury spending in watches and jewelry tend to skew higher in the region.
While neither LVMH or Kering specifically break out results for the Middle East, LVMH reported 14% of its revenue came from “other markets” including the Middle East, in its annual results for 2025. By comparison, 18% of its revenue came from sales in Europe (not including France). Kering said 9% of its 2025 revenue came from the “rest of the world”, with the Middle East included, noting that “the group’s sales in the rest of the world were stable and rose slightly in the Middle East”.
“Over the past couple of years, the region has been the sector’s standout growth market, in sharp contrast to the slowdown in China, Japan, and much of Europe,” Chauvet says. “This resilience reflects strong demand from both local clients and tourists, who we estimate account for more than a third of luxury sales in the Middle East.”
With the US advising citizens in places like Bahrain and the UAE to “strongly consider departing”, and the European Union issuing a conflict zone advisory for “airspace of the Middle East and the Persian Gulf”, tourism isn’t something the industry can bank on for the time being. As far as regional travel, minimizing unnecessary movement seems to be the overarching advice. Both the UAE and Bahrain have taken extra measures to ensure their own citizens can return from abroad safely. The UAE will also waive overstay fines for visitors having to stay put until they can travel again.
And that all of this conflict coincides with the Muslim holy month of Ramadan, called “Ramadan rush” in retail circles for its typical spikes in spending — both in the Middle East and among locals who often travel to Europe during the period — makes the disruption to the region’s usual economic and social rhythms particularly striking. In a 2025 report on Ramadan spending, Visa said clothing and apparel merchants saw 2.6 times more transactions in the 10 days leading up to Eid al-Fitr celebrations, as consumers look to both outfit themselves and give gifts for the holiday (Eid al-Fitr is on March 19 this year).
Even for those still inclined to spend on luxury, there’s the supply issue to consider. The Strait of Hormuz, a critical global trade passage that’s largely controlled by Iran, has seen container ships caught in strikes and companies scrambling to avoid the area altogether. At best, it means goods could experience delays getting into the Middle East. But in some cases, it may mean certain products don’t reach the region at all if companies decide waiting is better than to risk being involved.
Regardless, it’s a tricky time for luxury in the region so many brands have been counting on for growth.
In a report it released last May, Chalhoub Group said the personal luxury goods category reached almost $13 billion in the Gulf Cooperation Council (GCC, which comprises Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE) region in 2024, growing 6% despite luxury’s global decline. Fashion accounted for 43% of the total market for luxury goods. By Chalhoub’s projections, the market for personal luxury in the Middle East is expected to reach $15 billion by 2027, with 6% year-on-year growth until then. The reasons for that growth? A favorable macroeconomic environment, a high willingness to spend, robust tourism inflows, retail developments across the region, and growth in e-commerce. In short, things had been stable — but now, all of those drivers are in question.
The luxury market in the Middle East, adds Luca Solca, managing director of luxury goods for global equity research firm Bernstein, “has grown to be as important as Japan”. It’s largely dependent on resident spending, he adds, even in the most tourist-heavy areas like Dubai. The impact from what Solca calls “the third Gulf War” on first-quarter results for 2026 “is likely going to be adverse”.
“On a very rough-cut basis, we could assume this market halves for the month of March,” he says, with global demand taking as high as an 8% hit.
Of course, that all depends largely on what happens next.
“If we can count this crisis in weeks and then that stability returns, I would argue that it’s still going to impact the selling season,” FashionSights’s Berg says. “If it lasts much longer, or ends in an unstable situation, like a civil war, the damage would of course be higher on all fronts.”
Most analysts aren’t ready to make any sweeping statements on what the conflict could mean for luxury’s ongoing growth potential in the Middle East, with the situation still very much developing.
But Solca is inclined to see any damage on the business side of things as being contained.
“Our bias at the moment is that Israeli and American forces should be able to contain [the] Iranian attack quickly and avoid disruption to the global economy beyond the month of March,” he says. “The fact that [last] week energy stocks and defense stocks stopped surging while luxury stocks stopped falling, seems to indicate that the market is seemingly thinking the same way.”
