The trend: Luxury companies are beginning to feel the sting from war in the Middle East.

• LVMH said the conflict hurt Q1 organic growth by around 1%, with the biggest impact coming from its fashion and leather goods division.
• Kering’s Middle East revenues declined by 11% YoY in Q1, as sales fell off sharply following a strong start in the year’s first two months.
• The war has disrupted sales at several of the region’s biggest shopping centers, with declines of 30% to 50% at Dubai’s Mall of the Emirates and a sharp reduction in footfall and sales at other major luxury hubs, per Reuters.

Zoom out: While the Middle East accounts for a relatively small percentage of global luxury sales—roughly 5%, according to estimates—it has until now been one of the few bright spots in an industry struggling with uncertain growth in the US and China. Still, the impact to the luxury sector so far appears to be limited, with demand in North America and Asia picking up in spite of geopolitical turmoil.

• LVMH’s organic revenues rose 3% YoY in the US and 7% YoY in Asia excluding Japan, a considerable acceleration from 1% growth in both markets in Q4.
• Kering had an “excellent quarter” in North America, with sales up 9% YoY, partly offsetting declines in other markets.
• Brunello Cucinelli reported robust growth in most regions, with Americas revenues up 20% YoY, Asia sales rising 18%, and Europe increasing 4.4%.

The numbers suggest that affluent consumers are, for now, unfazed by war in Iran and its potential effects. That is a positive development for US businesses, who are increasingly reliant on wealthier households to drive growth.

However, the outlook is far from rosy for luxury brands. The conflict’s impact on the global travel industry could weigh on sales as skyrocketing costs dampen consumers’ desire to travel overseas and purchase luxury wares.

• LVMH CFO Cécile Cabanis noted that in the fashion and leather goods category, sales among local clientele are in positive territory, while sales to tourists are down by mid- to high-single digits—in large part due to the disruption in the Middle East.
• Kering flagged the war’s “potential impacts on global tourism trends and the macroeconomic backdrop” as key considerations that it is closely monitoring.

The implications: 2026 was expected to mark a turnaround for the luxury industry, aided by new creative leaders at a host of brands and recovering demand among consumers in the US and China. Our current forecast—last updated in July 2025—expects a 5.5% increase in worldwide personal luxury sales, a considerable uptick from 0.9% growth last year. That is mainly due to a rebound in China, where we anticipate sales will grow 5.4% versus a more modest 1% in the US.

However, while early signs were encouraging—including particularly strong receptions for the latest collections from Dior and Chanel—war in the Middle East threatens to upend that momentum.