Luxury goods sales fall in the Middle East amid ongoing conflict

The Middle East conflict has disrupted luxury consumption in Dubai and Abu Dhabi, reversing momentum in two markets that had been growing strongly, Reuters reported. Luxury brands saw weaker sales and foot traffic in March, with the impact linked to the escalation of hostilities that began late February.

Dubai: sales and footfall fall

At Mall of the Emirates in Dubai, luxury brands reported March sales down 30% to 50% versus March 2025, according to Reuters. Foot traffic to the mall—home to stores including Louis Vuitton, Dior, Gucci, Cartier, Chanel and Rolex—fell by 15%.

At the larger Dubai Mall, which is more associated with tourist traffic, footfall declined by as much as 50% over the same period.

Abu Dhabi: system-wide decline at Galleria

In Abu Dhabi, March sales at the Galleria shopping center fell by around 10% across the system, Reuters sources said.

Why the slowdown matters for luxury brands

The figures come as major luxury groups, including LVMH, Kering and Hermes, prepare to report quarterly results. The Middle East has previously been a bright spot for the sector: the global luxury market, valued at around $400 billion, declined 2% in 2025, according to Bain & Company, while the Middle East—about 5% of market share—recorded double-digit revenue growth in recent years, Barclays’ Carole Madjo said.

Madjo described Dubai as a “strategic region,” citing factors such as lower rents and labor costs, retail prices that are higher than elsewhere, and little to no tax.

High profitability, now under pressure

Sources familiar with Mall of the Emirates said annual revenue per square meter in Dubai can exceed several hundred thousand euros, far above the global average. However, the conflict has shaken the region’s carefully curated luxury image.

Conflict timeline and potential recovery delays

Airstrikes by the United States and Iran began on February 28. Some buildings and infrastructure in Dubai were attacked by Iranian drones, including the Burj Al Arab hotel and the airport. Experts said that if the conflict ends early, restoring shopping activity in affected centers could take months.

Broader risks to demand

Bernstein assessed spillover effects that could include higher oil costs and travel, inflation, or a potential stock market downturn, any of which could “easily disrupt” consumer demand.

Christopher Rossbach, a portfolio manager at J Stern & Co in London, said a recovery in the luxury sector from early 2026 is unlikely. “It is more likely to be postponed to the second half of the year or into 2027; I don’t think anyone would be surprised by that,” he said.

Near-term revenue vs. profit impact

Because the Middle East market is relatively small, the immediate impact on quarterly revenue for luxury brands may be limited. However, Rossbach said the effect on profits could be more pronounced in semi-annual reports.

Photo: Reuters.