This week, we take a look at the ongoing war between a U.S.-Israeli alliance and Iran, which has since spilled out to ensnare multiple other countries in the Middle East. With the Middle East being one of the fastest-growing luxury markets in the world, brands and retailers are already feeling impacts from the war, including store closures and loss of foot traffic. Down the line, rising energy prices could also affect fashion brands.
Last weekend, the United States and Israel jointly launched a war on Iran, striking multiple sites within the country and killing Iran’s supreme leader, Ayatollah Ali Khomeini, along with many of the Iranian government’s senior leadership.
Since then, things have rapidly escalated throughout the Middle East. The U.S. has sunk Iranian ships, killing hundreds; Iran has responded by sending out missile strikes into multiple nearby countries, like the United Arab Emirates and Qatar; and Israel has moved forces into Lebanon.
President Trump and U.S. leadership have issued contradictory claims about the war, including its purpose, motivation and stated timeline. Most recently, Trump said the war could last “four to five weeks,” but could also go “far longer.” Infamously, President George W. Bush declared “Mission Accomplished” a few months into the Iraq War in 2003, only for the conflict to last another eight years.
While the political and humanitarian impacts of large-scale war in the Middle East are still playing out, the region’s booming fashion and luxury market is already affected. Over the last few years, countries like Qatar and the UAE have positioned themselves as glamorous luxury destinations, courting heritage European brands and wealthy consumers from around the world. Now, many of those brands are closing stores and relocating employees away from danger.
With thousands of flights canceled across the Middle East, foot traffic to many of the region’s luxury shopping destinations is likely to plummet, according to Isaac Hetzroni, a supply chain expert who goes by “The Sourcing Guy” to his 450,000 followers on social media.
“Luxury brands are extremely sensitive to perception and stability,” Hetzroni said. “When global markets become volatile, high-end consumers often delay discretionary purchases, especially for big-ticket items like watches, jewelry and handbags. So even if supply chains remain stable, demand can soften simply because consumers become more cautious. Brands typically redistribute inventory between regions when demand shifts. If tourism slows in one market, those products can often be redirected to other strong markets, like Europe, the U.S. or parts of Asia.”
As of Wednesday afternoon, global luxury and fashion companies — including Chalhoub Group, which operates Versace and Sephora, and Kering — have closed stores and offices across the UAE, Bahrain, Kuwait and Qatar. Others, like Apple and Amazon, have done the same. On Tuesday, an Adidas store in Israel was reportedly bombed.
There’s already been a visible impact on the stock performance of many of luxury’s biggest companies. Richemont saw a 6% decline on the Swiss stock exchange, and LVMH and Kering both saw drops of around 4%, all in the days since the war began.
Alex Mantziaris is the owner of a luxury fur boutique in Dubai called Casiani. He told Glossy he hasn’t closed his store yet, but the impacts of conflict in the region are already clear.
“People move through the city differently when airspace closures and flight disruptions hit,” Mantziaris told Glossy. “Shopping stops being something that just happens on a whim. Sales have dropped for us. Walk-ins aren’t as consistent as they were a few weeks ago. The customers who do still come in, they’re asking things they never used to ask this early, like, ‘When will it arrive?’ ‘What if shipping stops?’ and ‘Can you stand behind [the provided] timeline?’ That shift in the conversation tells you a lot about where people’s heads are at.”
While danger to customers and employees is the biggest immediate impact from the war, another longer-term concern is oil prices. Iran has historically closely guarded the Strait of Hormuz, a waterway through which a quarter of the world’s oil passes.
The Trump administration has vowed that the U.S. Navy would escort oil tankers through the Strait of Hormuz, but the strait remains effectively closed as of Wednesday afternoon. Iran has stated that it still has control of the strait, and experts say that Iranian drones can cause disruptions of commercial vessels for months to come.
“Consumers will likely see price increases, even if there is a short conflict and a peace deal that occurs in the near term,” said Amrita Bhasin, co-founder and CEO of the inventory management company Sotira. “Freight prices can rise due to the potential of risk or potential of shortages. Any instability or potential of geopolitical conflict can spike fuel, oil and gas prices. This impacts freight rates. These price increases inevitably pass down to the consumer.”
Oil prices are already up 15% since the war began on Saturday. Last year, after the previous U.S.-Israeli conflict with Iran, oil prices came back down in a matter of days after the conflict ended. But as this current conflict seems both larger and less likely to end anytime soon, those prices could keep climbing.
“If tensions disrupt oil supply or key shipping routes, transportation costs can rise across the entire retail industry,” said Hetzroni. “Oil prices affect everything from container shipping to air freight to domestic trucking. Even a moderate increase in oil prices can ripple through supply chains because nearly every product sold globally has transportation costs embedded in its price. For brands that manufacture internationally, rising freight and logistics costs can squeeze margins or push brands to slightly adjust pricing.”
Mantziaris said, right now, everything comes down to exactly how long the conflict will last.
“It’s not complex. Fuel goes up, freight goes up,” he said. “If risk continues, insurance and security premiums go up. Transit times are harder to predict. Prices fluctuate, and margins are cut until someone must adjust pricing. If this is short, most brands can shoulder the pressure and get back to business. But if this continues, brands will need to plan for a higher-friction environment across everything they do. Collection drops, shipping delays and security will affect how confidently you can sell internationally.”
Other news to know
- The Missoni family has officially relinquished control of its namesake fashion brand. FSI, a Milanese private equity fund, now has a controlling stake in the company.
- Numerous companies reported dim earnings this week, thanks to continued struggles with tariffs. Both Adidas and Abercrombie & Fitch said tariff concerns contributed to muted sales this past quarter.
- Lululemon founder Chip Wilson continues to wage a PR campaign against the company’s current leadership, commenting publicly about his dismay with the direction his company has taken since he stepped back from leading it. Most recently, he has been lobbying to get one of his own picks appointed to creative leadership of the brand.
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