Economic fallout of Iran war wipe out billions from global luxury market

Major luxury stocks have dropped 15% or more since the start of the Iran war, with analysts warning that sales in the increasingly important Middle East market could fall by as much as half.

Shares of LVMH and Hermès, who together account for a large chunk of the international luxury brands, are down roughly 16% and 20% this month, respectively, while the S&P 500 has declined by less than 6%. Shares of Ferrari have also fallen about 15%, with the company announcing a temporary suspension of deliveries to the Middle East, as highlighted in a CNBC article.

Fluctuations in share price have already wiped out approx. $100 billion in market capitalisation from the major luxury companies, with LVMH and Hermès both losing more than $40 billion in value each.

Bentley, Maserati, and other high-end automakers are similarly halting deliveries due to security concerns and logistical challenges.

“At the moment, we don’t have an impact from a production side,” said Bentley CEO Frank-Steffen Walliser during a recent investor call. “But for sure, people in the Middle East have other thoughts than looking for a new Bentley at the moment.”

For investors and luxury firms, the Iran war has underscored the growing importance of the Middle East to the global luxury sector and the high-net-worth economy. While the region still represents a relatively small portion of total luxury sales, the outlet notes that its growth has become increasingly vital to the industry.

The Middle East was the fastest-growing luxury market in the world last year, expanding between 6% and 8%, compared with flat global growth, according to Luca Solca of Bernstein. The region now accounts for about 6% of global luxury sales and could begin to rival Japan, which holds around 9%, according to Solca.

Dubai in the United Arab Emirates has been the main engine of this growth, contributing about 80% of the UAE’s expansion, which itself makes up more than half of the region’s total luxury growth, based on research from Morgan Stanley.

According to the article, the current instability comes at a crucial moment for the luxury sector. After two years of stagnant performance, the industry had been counting on a recovery in 2026. 

The China market has begun to show modest improvement following years of decline, while the United States continues to support luxury demand thanks to rising wealth linked to artificial intelligence and stock market gains. Europe has remained relatively steady, partly supported by tourism spending.

A research note from UBS analyst Zuzanna Pusz and her team to the American outlet said investor sentiment toward luxury is “the most bearish in years.” While markets had anticipated a rebound at the start of the year, “heightened geopolitical uncertainty is likely to weigh on near-term earnings and delay the long-awaited inflection in fundamentals.”

By Nazrin Sadigova