Updated 4:27 p.m. ET March 2
LONDON — Luxury stocks took a hit on Monday and are expected to come under continued pressure as the renewed conflict in the Middle East hits consumer confidence.
Among the high-end decliners for the day were Compagnie Financière Richemont, down 5.7 percent to 148.25 Swiss francs; Kering, 5 percent to 271.50 euros; Brunello Cucinelli, 4.6 percent to 78.58 euros; Burberry Group, 4.3 percent to 11.13 pounds, LVMH Moët Hennessy Louis Vuitton, 4.3 percent to 520.50 euros, and Hermès International, 4 percent to 1,967 euros.
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In the U.S., Wall Street also trended lower for much of the day although the S&P 500 ended with a 2.74 point increase to 6,881.62. Those losing ground included, E.l.f. Beauty Inc., down 11.3 percent to $81.64; Estée Lauder Cos., 8.5 percent to $100.19; American Eagle Outfitters Inc., 8.4 percent to $22.50; Capri Holdings, 5.1 percent to $19.47, and Lululemon Athletica Inc., 4.9 percent to $176.17.
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Early Monday, Piral Dadhania, an analyst at RBC Capital Markets, issued a report that warned the bank is expecting “stocks to be under pressure given luxury demand typically requires a ‘feel good’ backdrop, supportive consumer confidence, positive wealth creation and unabated traveler flows, all of which will be negatively impacted at least in the short term.”
However, luxury spending and the attendant stock market reaction are a small ripples spreading out from a conflict that has much bigger geopolitical ramifications and deadly on-the-ground consequences.
U.S. and Israeli strikes on Iran this weekend killed the country’s supreme leader and longtime dictator Ali Khamenei as well as top government officials. The conflict quickly escalated across the region to Israel, Abu Dhabi and Dubai, the most important consumer market in the Middle East.
Hundreds of civilians have been killed as a result of both the U.S. and Israeli strikes and counter attacks by Iran. Commercial air space is shut down, and U.K. and U.S. bases have been suffering attacks in the region.
Dadhania said the stronger U.S. dollar should ultimately benefit eyewear giant EssilorLuxottica, jeweler Pandora and luxury goods companies, while it will be negative for sporting goods on a lagged basis.
The bank added that it is tilting its stock preferences toward more “defensive names,” including EssilorLuxottica, Nike and Hermès “all of which have strong balance sheets and generate heathy cash flow.”
It said luxury companies such as Swatch Group, Richemont and LVMH are more highly exposed to the conflict, while non-luxury companies are less so.
“Luxury demand relies on positive consumer confidence and constructive outlook of one’s future prospects, as well as the consumer experience, which is often less transactional and more emotional. Conflict, shock, uncertainty and fear are not helpful in this context and can have a short-term impact on luxury demand,” Dadhania wrote.
“Further, traffic in Dubai is absent, with residents remaining indoors in recent days. Depending on the extent of this curfew this could have an impact on revenue generation in the most important consumer market in the Middle East,” he added.
Impact on Tourism
The effect on luxury tourism remains to be seen. The Accor-operated Fairmont The Palm Hotel in Dubai caught on fire Saturday following Iranian missile strikes. Accor shares were down more than 9 percent in Paris on Monday.
“Authorities confirm that a drone was intercepted, and debris caused a minor fire on the Burj Al Arab’s outer facade. Civil Defence teams responded immediately and brought the incident under control. No injuries have been reported,” the hotel group said in an emailed statement to WWD.
Hotels on Dubai’s The Palm Jumeirah area were open and operating on Monday. WWD contacted the Sofitel Dubai The Palm, the W Dubai — The Palm and Atlantis The Royal, all of which said indoor facilities including food and beverage were open, though their outdoor facilities were closed until further notice.
The iconic Burj Al Arab hotel also suffered damage over the weekend. In a statement, its Dubai-based media office said the situation was currently under control.
UAE’s Ministry of Defence said late Sunday that air defense forces have intercepted the majority of airborne attacks. In a post on Instagram, the ministry said it destroyed 506 drone aircrafts out of a total of 541 detected. It also destroyed 152 out of 165 ballistic missiles detected.
Dadhania also said post-Ramadan travel to Europe may be affected. The timing of this conflict is during Ramadan, the holiest month of the Islamic lunar calendar, observed by Muslims worldwide. Ramadan is due to end on March 18.
“Given the timing of the Iran War conflict, and the current grounding of commercial flights, 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,” he wrote.
Dubai Retailers Stand Firm
Despite the strikes, Dubai’s major shopping malls have remained open, and mall operators are making clear they intend to keep it that way. In a circular to tenants over the weekend, seen by WWD, Emaar Malls Management warned that any unilateral closure of stores, suspension of operations or reduction of trading hours without an official government directive or written approval from Emaar would constitute a material breach of lease agreements and a violation of government mandates requiring commercial establishments to maintain normal operations. The circular stated that unauthorized closures would be referred to the Dubai Department of Economy and Tourism and the Department of Economic Development.
The language underscored the tension between Gulf authorities’ determination to project business-as-usual stability and the reality facing luxury brands whose staff and customers are contending with an active conflict zone. Major malls, including Mall of the Emirates, Dubai Mall and City Centre Deira, were operational, and supermarkets across the region were running normally with ample supply.
But a number of high-profile luxury tenants chose to close regardless. LVMH brands, including Louis Vuitton and Dior, shut their doors for two days following the initial strikes, as did Hermès. They joined a list of brands including Prada, Givenchy, Maison Margiela, Kenzo, Rimowa, Tumi and Sephora that shuttered over the weekend. Apple also closed its UAE stores. Most were expected to reopen by midweek should the security situation stabilize, according to people familiar with the matter.
An Uneven Picture Across the Wider Gulf
In Bahrain, which suffered more sustained damage from Iranian missile and drone strikes, Majid Al Futtaim closed its mall entirely. In Dubai, by contrast, the company’s properties remained open and its Carrefour supermarket operations ran without interruption. Some smaller businesses across the emirate, including fitness studios, salons and boutique retailers, opted to pause operations for the weekend, but could reopen as early as Tuesday.
The disruption has hit at the worst possible moment for the Gulf’s retail economy. Ramadan is the region’s peak shopping season, when luxury spending surges ahead of Eid al-Fitr. For a retail ecosystem that depends on foot traffic, tourism flows and consumer confidence, every lost day during Ramadan carries outsize commercial weight.
Supply Chain Impact
The RBC report added that supply chain disruption for east-west shipping will hit sporting goods in particular.
“If the Strait of Hormuz shipping lane is disrupted for a prolonged period, this would be negative for [Nike, Adidas and Puma] which source product from Asia that is then shipped to Europe through this route. If the cost of cargo insurance, cargo freight rates and need for air freight increase, then this would have negative impact on gross margins,” he wrote.
Separately, oil prices are set to surge, according to media reports here, with brent crude hitting $82 a barrel on Monday due to tankers being blocked from passing through the Strait of Hormuz. That will translate into a spike in fuel and energy costs, boosting inflation and increasing business costs.
The FTSE 100 was broadly flat in late-morning trading on Monday, while the CAC 40 index of top European stocks was down 1.4 percent.