LVMH reported that the conflict reduced its organic sales growth by approximately 1% in the first quarter. The French luxury giant's sales rose 1% to £16.53 billion (€19.1 billion) in the period, missing analyst forecasts for a 1.5% increase. Sales at LVMH's fashion and leather goods division fell 2% organically, impacted by the Middle East conflict. Major media reports indicate the war with Iran has negatively impacted sales at LVMH, making it the first luxury giant to provide insight into how the war has affected its wealthy clientele.
The war has disrupted travel to shopping hubs in the Gulf, including Dubai, according to major media reports. It has also reduced demand in Europe from tourists visiting from the Middle East. LVMH said its business in the Middle East has been disrupted after a very positive start to the year. This disruption to the Middle East luxury market and travel has directly affected LVMH's performance in what was previously a high-growth region.
Research from seven sources indicates the war in the Middle East is upending lives and livelihoods in the region and beyond, dimming the outlook for many economies. The conflict has caused serious disruption to the economies of the most directly affected countries, with damage to infrastructure and industries that could become long-lasting. This broader economic impact extends beyond luxury goods to fundamental sectors, creating uncertainty for global markets.
The ongoing war in the Middle East has resulted in the Strait of Hormuz being effectively closed, according to research from seven sources. About 25-30% of global oil and 20% of liquefied natural gas pass through the Strait of Hormuz. About a fifth of the world's oil passes through the Strait of Hormuz – around 20 million barrels each day, according to estimates from the US Energy Information Administration. The International Energy Agency stated that the de facto closure of the Strait of Hormuz and damage to regional infrastructure have produced the largest disruption to the global oil market in its history.
Research from seven sources indicates US and Israeli military strikes on Iran have sent global oil and gas markets spiraling. A disruption in one part of the world (such as the Strait of Hormuz) will lead to a global spike in crude oil prices. Multiple US–Iran conflict scenarios carry materially different risks for global oil infrastructure, transit routes, and prices. In a scenario involving direct kinetic attacks between the United States (possibly with Israel) and Iran, including strikes on oil infrastructure, prices would likely experience a significant shock. These military actions and infrastructure risks are driving extreme volatility in energy markets.
Energy shipments from the Middle East have been at a standstill following Iran's threats to attack vessels that pass through a critical trade waterway as retaliation against US-Israeli strikes, according to research from seven sources. The blockade has led to a global oil shortage which has rocked Gulf-reliant Asian countries hard. This shortage is creating supply chain disruptions and economic strain across Asia, where many economies depend heavily on Middle Eastern energy imports.
China uses an estimated 15 to 16 million barrels of oil daily, according to various market analysts. Research from seven sources indicates Russian oil accounts for nearly a fifth of China's energy imports, making Moscow by far Beijing's biggest oil supplier. This reliance on Russian imports provides some insulation for China during the current crisis, though the global shortage still poses significant challenges for the world's largest energy consumer.
Major luxury stocks have dropped 15% or more since the start of the Iran war, with analysts warning that sales in the increasingly important Middle East market could fall by as much as half, according to research from seven sources. Shares of LVMH and Hermès are down roughly 16% and 20% this month, respectively. Fluctuations in share price have already wiped out approximately $100 billion in market capitalisation from the major luxury companies, with LVMH and Hermès both losing more than $40 billion in value each. This represents one of the most severe market corrections in the luxury sector in recent years.
The Middle East was the fastest-growing luxury market in the world last year, expanding between 6% and 8%, compared with flat global growth, according to Luca Solca of Bernstein. This rapid expansion made the region increasingly important for luxury brands seeking growth beyond traditional markets like Europe and North America. The current conflict has abruptly halted this growth trajectory, creating significant challenges for companies that had invested heavily in the region.
The International Energy Agency (IEA) on 10 March proposed a collective release of 400 million barrels of oil from emergency reserves, a measure that was approved by all member countries on 11 March, according to research from seven sources. This unprecedented coordinated action represents the largest strategic petroleum reserve release in history, aimed at stabilizing global markets amid the supply disruption. The emergency measure underscores the severity of the current oil market situation and the international community's concern about economic impacts.
LVMH said new stores in China are performing well, with strong growth in its Asia region, including China. The company reported that a new flagship Louis Vuitton store in Beijing has had an excellent performance. This positive performance in China is helping offset some of the losses from the Middle East disruption, though it may not fully compensate for the decline in what was previously a high-growth market.
Birkin Bag maker Hermès will update investors tomorrow, according to major media reports. This update will provide crucial information about whether other luxury giants have experienced similar sales declines due to the conflict. Analysts will be watching closely to see if Hermès reports comparable disruptions in the Middle East market and how it is managing the current challenges.
Major media reports indicate LVMH is the first luxury company to detail how the war has affected its wealthy clientele. This transparency provides valuable insight into how geopolitical conflicts can impact high-end consumer markets that are often considered insulated from broader economic pressures. Other luxury companies are likely facing similar challenges but have not yet publicly disclosed the extent of the impact.
It remains unclear what specific measures LVMH or other luxury companies are taking to mitigate the sales impact in the Middle East. The exact timeline for when the Strait of Hormuz might reopen or shipping resume normally is also unknown. How long the negative impact on LVMH's sales and stock price is expected to last has not been determined.
Whether other luxury giants like Hermès have experienced similar sales declines due to the conflict will become clearer after their upcoming reports. The full extent of infrastructure damage in the Middle East and the cost of repairs has not been fully assessed. These unknowns create significant uncertainty for investors and policymakers trying to gauge the duration and severity of the current crisis.