Sales at luxury boutiques in Dubai's Mall of the Emirates fell 30-50% in March from a year earlier, sources told Reuters. The plunge reflects the fallout from the Iran conflict, which has disrupted one of the sector's few remaining growth areas.

Footfall at the mall dropped 15% last month. Traffic at the larger Dubai Mall, a tourist magnet, declined around 50%, according to two industry sources. In Abu Dhabi, sales at the Galleria mall eased by about 10%.

The Middle East represents roughly 5% of global luxury spending but had delivered double-digit revenue increases recently, noted Carole Madjo, Barclays luxury research head. Dubai offered low costs, high prices and tax advantages, generating sales per square meter several times the worldwide average for brands like Louis Vuitton and Gucci.

That momentum halted after U.S. and Israeli strikes on Iran began February 28, followed by Iranian drone attacks on Dubai infrastructure including its airport and Burj Al Arab hotel.

LVMH (MC), the world's top luxury group trading at €464 with an Outperform consensus and €530 target, owns brands like Louis Vuitton and Dior present in these malls. Kering (KER), at €248 with a Hold rating and €270 target, operates Gucci stores there. Richemont (CFR), at CHF138 with a Hold consensus and CHF180 target, features Cartier outlets.

While the region's small share limits immediate quarterly sales effects, profit impacts could prove sharper, given Dubai's lucrative margins. LVMH reports Q1 sales Monday, followed by Kering and Hermes later in the week.

The broader industry contracted 2% last year per Bain & Company, with LVMH and Kering losing over €100 billion in combined market value since 2022 peaks. Bernstein analysts warn conflict ripples like higher oil prices could curb U.S. demand too.

Christopher Rossbach of J Stern & Co sees any 2026 recovery delayed. Recovery in Dubai may take months even with a ceasefire.