Shares LVMH and Hermes have lost in the last month respectively 16 percent. and 20 percentwhile the S&P 500 fell less than 6%. Ferrari saw a decline of 15%.. and temporarily suspended deliveries to Middle Eastern countries. Bentley, Maserati and other luxury carmakers are also limiting deliveries due to safety risks and logistical problems.
“We have no problems on the production side, but customers in the Middle East currently have other priorities than buying a new Bentley,” says Frank-Steffen Walliser, president of Bentley.
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The region that was supposed to attract the industry is now its weakness
Although the region accounts for a small part of global sales, its dynamic growth is crucial for the industry. According to Bernstein analyst Luca Solci, The Middle East was the fastest growing luxury goods market in the world last year (6-8 percent growth). The region is already responsible for approximately 6%. the sector's global sales and could soon equal Japan's (9%).
Dubai remains the biggest growth engine, responsible for 80 percent growth in the United Arab Emirates, which constitutes more than half of the growth of the entire region – according to Morgan Stanley analyses.
Problems in the Middle East come at a time when the luxury industry was hoping for a rebound after two years of stagnation. The Chinese market is slowly starting to improve, American consumers remain strong and Europe remains stable thanks to tourism.
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Investors in the worst mood in years
The market mood is extremely pessimistic. According to analysts, although the beginning of the year brought hopes for recovery, growing geopolitical uncertainty will likely negatively impact results and delay the sector's recovery.
LVMH and Hermès have already lost over $40 billion each. values. Experts warn that a halving of sales in the Middle East may reduce the quarterly growth rate of many companies by approximately 1 percentage point.
Some people, however, tone down their moods. Analyst Luca Solca from Bernstein emphasizes that many companies are still able to reach key customers, and wealthy residents of Dubai often buy luxury goods abroad anyway. If the situation stabilizes soon, the impact on the industry may be limited.
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Dubai remains a magnet for the wealthy
Dubai remains one of the biggest global magnets for the wealthy. No income taxstability and climate have attracted record numbers of millionaires in the last decade — according to data from Henley & Partners, their population has doubled, to over 81,000.
In 2025, another 9.8 thousand people moved to the city. people with a total wealth of USD 63 billion. — the most in the world. Most of them come from Great Britain, China, India and countries in Europe and Asia.
At the same time, Dubai's reputation as a safe haven has been damaged. As much as 60 percent luxury spending in the UAE comes from tourists – mainly from Russia, Saudi Arabia, China and India. It is this group that may limit travel to the region, even if the conflict ends.
Rising oil prices and stock market fluctuations are another blow
While the richest consumers still have access to capital, the so-called aspirational buyers may pause purchases due to rising fuel and food prices. Higher oil prices also increase the risk of stock market corrections – and the spending of the wealthy is very strongly correlated with the condition of stock markets.
— Higher oil prices may trigger a correction in the markets. And that would be a very bad scenario – Solca warns. — The mood among the wealthiest investors whose wealth is invested in shares could deteriorate rapidly.
Source: CNBC
