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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 about 1 percentage point for many luxury companies.

Yet he said the decline could be milder. While stores and malls in the region may be largely empty, many luxury companies are still carrying out sales by reaching out individually to top clients and delivering products to their homes. Solca also said the wealthy who have left Dubai may continue spending on luxury in other countries.

“Most of the companies we’ve been talking to are not really pointing to a disastrous decline in the Middle East,” Solca said. “At the end of the day, if this was contained to the month of March, this would largely be a nonevent.”

Other contributing factors to Dubai’s recent success – no income taxes, stable governments, sunny beaches – remain intact. The city’s millionaire population has doubled since 2014 to more than 81,000, according to Henley & Partners. An estimated 9,800 millionaires moved to Dubai in 2025, bringing $63 billion in wealth — more than any other country in the world, according to Henley. Most of Dubai’s wealthy are arriving from the U.K., China, India, and other parts of Europe and Asia.

Still, Dubai’s reputation for safety and security has been shaken. The Middle East luxury market is heavily dependent on wealthy tourists, who may avoid the region long after a possible ceasefire.

According to Morgan Stanley, around 60% of luxury spend in the UAE is courtesy of tourists, of which 60% are Russian, Saudi, Chinese and Indian visitors. Of the remaining 40% spent by UAE residents, about half is from foreign UAE residents, who may also change their plans to stay in the region long term.

Higher oil prices could also weigh on luxury sales. Analysts say aspirational luxury consumers, who are more sensitive to inflation and economic slowdowns, could pull back on spending with higher gas prices and food costs. At the same time, wealthy consumers could be spooked by volatile stock markets. Since the spending of the wealthy is more dependent on stock markets and the so-called wealth effect, declining or even flat stocks could cause a pullback.

“Higher oil prices could prompt a downward adjustment in global stock markets and that would be very bad,” Solca said.” The consumer sentiment of people with wealth in the stock market would be damaged.”