Iran war wipes out $100 billion from luxury stocks

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Major luxury stocks have fallen 15% or more since the Iran war started, and sales in the increasingly important Middle East market could drop by half, according to analysts.

Shares of LVMH and Hermès are down roughly 16% and 20%, respectively, this month, while the S&P 500 has fallen less than 6%. Shares of Ferrari are also down 15%, and the company announced it would temporarily suspend deliveries to the Middle East. Bentley, Maserati and other high-end car companies are also halting deliveries due to security risks and logistics.

“At the moment, we don’t have an impact from a production side,” said Bentley CEO Frank-Steffen Walliser on the company’s 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 companies, the Iran war has highlighted the increasing importance of the Middle East to the global luxury industry and the high-net-worth economy. While the region accounts for a relatively small share of overall luxury sales, it’s growth has become critical to the industry.

The region was the fastest-growing luxury market in the world last year, posting growth of between 6% and 8% compared with flat growth globally, according to Bernstein luxury analyst Luca Solca. The Middle East now accounts for about 6% of global luxury sales, on pace to potentially rival Japan, which claims about 9% of global sales, according to Solca.

Dubai in the United Arab Emirates has been the biggest driver of growth, accounting for about 80% of the UAE’s rise, which itself accounts for more than half the luxury growth in the full region, according to research from Morgan Stanley.

The troubles in the Middle East come at a critical time in the luxury industry. After two years of stagnant sales, the industry was betting on a recovery in 2026. The China market has been showing slight improvements in sales after years of declines. The U.S. luxury consumer remains strong, thanks to rising wealth from artificial intelligence and stock markets. And Europe remained steady, helped in part by spending from tourism.

A research note from UBS luxury analyst Zuzanna Pusz and her teams said investor sentiment in luxury is “the most bearish in years.” While investors had been betting on a rebound in the beginning of the year, “heightened geopolitical uncertainty is likely to weigh on near-term earnings and delay the long-awaited inflection in fundamentals.”

Share price moves have already wiped out roughly $100 billion in market cap from the major luxury companies, with LVMH and Hermès both losing more than $40 billion in value each.

Solca said that if sales in the Middle East fall by half in March, which he described as a worst-case scenario, quarterly growth would drop by…