Luxury: Is Dubai's safe haven status coming to an end?

As the giants of the CAC 40 publish their quarterly results, an exclusive analysis by Reuters reveals the scale of the upheaval hitting the Middle East. Long considered the sector's last growth engine, the Gulf is now seeing its sales collapse due to geopolitical tensions with Iran.

Until now, major luxury groups like LVMH, Kering, and Hermès presented the Middle East as a resilient region, offsetting the slowdown in China. This perspective is now obsolete. According to information reported by Reuters, sales for the largest European houses plunged by 30 to 50 percent in March at the Mall of the Emirates in Dubai. Even more strikingly, footfall at the Dubai Mall, a global barometer for luxury shopping, reportedly dropped by 50 percent.

End of the Emirati 'safe haven'

Dubai is not just a local market; it is a re-export hub and a major shopping tourism destination for Russian, Indian, and European clients. The regional instability, marked by tensions between Iran, Israel, and the US, is shattering the United Arab Emirates' image as a 'secure bubble'.

While the Middle East accounts for only 5 percent of global luxury consumption, its contribution to marginal growth was crucial. Carole Madjo, an analyst at Barclays, noted that it was one of the few regions with double-digit growth in recent years. Seeing it falter now deprives these groups of their 'plan B' as China fails to recover.

Risk of contagion in the US

The analysis extends beyond the Gulf's borders. As highlighted by Reuters, analysts at Bernstein are now concerned about a domino effect. Instability in the Middle East does not just impact boutiques in Dubai:

Energy prices: A sustained rise in oil prices weighs on household morale, even in the US.
Travel inflation: The cost of airline tickets and insecure air routes are hindering global travel retail.
The wealth effect: A stock market crash or increased volatility immediately reduces spending by so-called 'aspirational' customers.

High-stakes schedule

This revelation comes at a sensitive time for Kering, which is holding its Capital Markets Day in Florence this Thursday. Luca de Meo will undoubtedly have to answer much darker questions than anticipated about the group's geographical diversification. As for LVMH, while the group managed to limit the damage this quarter, the prospect of a return to normality that will “take months”—according to experts cited by Reuters—dampens hopes for a solid recovery in 2026.

The luxury sector is no longer just facing an economic slowdown cycle, but a forced reorganisation of its profit geography.

This article was translated to English using an AI tool.

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