Middle East conflict cools expectations for Swiss watch industry recovery

Watchmakers are preparing for the industry’s flagship annual event, Watches and Wonders, scheduled for April 14 to 20. While Swiss luxury exports showed early momentum at the start of 2026, the outlook for recovery remains clouded by the ongoing conflict in the Middle East and broader pressures on demand and margins.

Early 2026 signals, but a likely reversal

Swiss watch exports rose by 2.8% in the first two months of 2026, according to the Federation of the Swiss Watch Industry (FHS). However, the trend is forecast to reverse in March.

Middle East growth: a bright spot, but not enough

In recent years, the Middle East has been one of the few areas supporting growth. FHS data show exports to the UAE rose by about one third between 2021 and 2024 and continued to rise last year, even as the industry’s overall performance weakened. The UAE market has also surpassed traditional destinations such as Italy and Germany.

Still, industry participants do not view the region as a solution to all challenges. The Middle East’s growth is not sufficient to offset China’s sharp decline, and it does not match the scale of the United States market, where demand has nearly doubled since 2019.

Investment in the region reflects long-term expectations

Over the past five years, watch brands have invested in Abu Dhabi, Dubai, Qatar and Riyadh, reflecting long-term confidence in the market. Investments have included boutique networks, mall retail, premium customer service and biennial events such as Dubai Watch Week.

Analysts suggest that a scenario in which the conflict ends quickly could help sustain this confidence, while a prolonged war would continue to increase pressure on the industry.

Margin pressure and demand risks

Rising costs, tariffs, a stronger Swiss franc and higher gold prices are eroding margins, with no clear sign of relief. In addition, after some positive signals in Q1—supported by a modest rebound in demand from China—many brands are increasingly concerned about the risk of a downturn in the second half of the year.

China: hopes for stabilization, but losses remain large

Recent export data suggest the decline in the Chinese market may have bottomed out, raising hopes for long-term positive growth. However, experts say China is unlikely to offset roughly CHF 1 billion (about USD 1.25 billion) in annual export losses since 2021.

France rebound questioned as a data anomaly

In contrast, exports to France surged 47% in January–February, but the FHS rejected the interpretation of a sustained rebound. It said the increase was a data anomaly linked to re-exports as brands seek tax-efficient distribution routes.

What Watches and Wonders may signal

At the industry’s flagship event in Geneva in March, brands are expected to maintain a positive public image. Executives are seeking stability and reassurance alongside expectations for a strong reception of new collections.

Luxury strategy: lower output, higher value

In the high-end segment, pure luxury brands have not signaled a reversal of the decade-long shift toward lower output but higher value. The strategy emphasizes ultra-rich customers (UHNW) through limited editions and promises of exclusivity.

Volatility for mid-range and value-sensitive buyers

For brands selling watches at a few thousand dollars—where profit margins are already narrow and consumers face rising energy costs—volatility remains a key concern. Mid-range brands including Omega, IWC, Hublot, Breitling and Panerai are also navigating a more uncertain market environment.

Industry structure shifting toward the ultra-wealthy

The industry’s size is shrinking and becoming less mass-market. While the internet and social media once helped broaden reach, products are increasingly targeting a new super-wealthy tier, widening the tension between accessibility and luxury.

Expert views

Bernstein analyst Luca Solca said: “We believe President Donald Trump would want to end the conflict sooner rather than later, so I maintain a cautiously optimistic view of the industry.”

LuxeConsult’s Oliver Müller warned that the Middle East conflict could leave “lasting negative effects on sales in the region,” adding that the period ahead may be “one of the most challenging periods for our industry.”