Five days into the most significant military escalation the Gulf has seen in modern history — with Iranian strikes hitting back at American facilities, including the U.S. consulate in Dubai late Tuesday night — the region’s luxury retail sector is operating in a state of constant recalibration.
Retailers are opening and closing stores across six countries, checking in with employees on an hourly basis and tracking government guidance that shifts by the day.
And investors around the world are doing much the same.
Luxury stocks fell again on Tuesday as the sell-off spread to global markets and oil prices spiked.
The high-end decliners included Salvatore Ferragamo, down 7.4 percent to 6.01 euros; Moncler, 6.5 percent to 52.92 euros; Kering, 6.4 percent to 254.25 euros; Brunello Cucinelli; 5.6 percent to 74.20 euros; L’Oréal, 4.5 percent to 363.75 euros; Compagnie Financière Richemont, 4.1 percent to 142.25 Swiss franc; Hermès International, 3.5 percent to 1,897.50 euros; LVMH Moët Hennessy Louis Vuitton, 3.5 percent to 502.20 euros, and Burberry Group, 3.3 percent to 10.72 pounds.
The semblance of calm that global markets managed to maintain on Monday cracked, sending the Dow Jones Industrial Average down as much as 2.6 percent before a partial rebound that left it down 0.7 percent to 48,552.39 in midday trading. Markets in Berlin, Paris, Milan and Tokyo all closed off more than 3 percent.
Those declines reflect a long list of new questions facing the business world — from the cost of oil coming out of the Middle East and supply chain disruptions to consumer confidence and the grinding uncertainty.
Chalhoub Group, the Middle East’s largest luxury retailer, which operates some 900 stores for brands including Level Shoes, Versace, Ferragamo and Farm Rio, is at the white-hot center of it all.
On Tuesday, chief executive officer Michael Chalhoub offered a rare window into how the company is managing operations across the Gulf Cooperation Council states amid the crisis triggered by the joint U.S.-Israeli military strikes against Iran that began on Feb. 28.
“At moments that challenge routines and certainty, we’re reminded of what really defines strong communities: unity, responsibility and trust across the region,” Chalhoub said in a statement shared with WWD. “Our risk and crisis committee remains fully activated, monitoring developments closely and coordinating decisions across all markets. Our people’s safety remains at the center of every decision we make.”
He also added: “Across the region, we recognize and appreciate the wisdom of our leaders and the efforts of emergency teams, and institutions working to safeguard people and maintain stability.”
The statement is notably measured given the magnitude of the moment.
Since Saturday, Iran has launched hundreds of ballistic missiles and drones across the GCC in retaliation for the U.S.-Israeli assault that killed Supreme Leader Ayatollah Ali Khamenei and senior military leaders. The UAE has borne the brunt of the barrage, with its defense ministry reporting it has contended with 165 ballistic missiles, two cruise missiles and 541 drones since the strikes began. Debris from intercepted missiles has damaged landmarks including the Burj Al Arab hotel, and struck Dubai International Airport, one of the world’s busiest aviation hubs, which is currently operating only a limited number of flights. Bahrain, Kuwait, Qatar, Saudi Arabia and Oman have all faced attacks, and the Gulf Cooperation Council has collectively condemned the strikes as a violation of sovereignty and international law.
The UAE government has recommended that private sector companies implement remote working arrangements, with exceptions for essential roles. Malls have remained open — in part because they house essential services including supermarkets and food delivery operations. The UAE president was photographed greeting shoppers at Dubai Mall on Monday night in what was widely interpreted as a deliberate show of normalcy and resilience.
But behind the scenes, the calculus for retailers is enormously complex. Chalhoub is managing a sprawling portfolio of brand partnerships across the UAE, Saudi Arabia, Bahrain, Kuwait, Qatar and Jordan, each country presenting a different risk profile and set of operating conditions. Saudi Arabia has been largely business as usual. Bahrain shut all stores over the weekend, but reopened them on Tuesday. The UAE is somewhere in the middle: malls are open, but staffing is voluntary.
“We’ve implemented flexible working arrangements, voluntary store and distribution center attendance where appropriate and relocation support when necessary,” Chalhoub said. “Well-being and mental health resources are fully accessible. We operate in alignment with local authorities and constantly adapt to the evolving circumstances across countries, specific cities and areas of the cities and malls.”
The company’s risk and crisis management committee — made up of C-suite executives, health and safety specialists, HR representatives and administrative staff — has been meeting with heightened frequency, holding at least two calls per day with country managers. Leadership from the Chalhoub executive team personally visited Dubai Mall and Mall of the Emirates on Monday to check in with staff on the ground.
“Simply put, we want to protect our people first, while maintaining business continuity responsibly,” Chalhoub said. “Our contributions bring reassurance, stability and a sense of normality to communities that look to shared spaces for comfort and confidence during challenging moments.”
The Chalhoub Group’s response offers a lens into the broader dilemma facing luxury and retail operators across the Gulf. This is a region that has emerged over the past several years as one of the few growth engines for an industry struggling with softening demand from Chinese consumers and a broader post-pandemic hangover. Last year, Bain & Company described the Middle East as luxury’s brightest performer. Many major brands now count their Dubai stores among their highest-grossing globally. The Gulf’s contribution to global luxury spending has risen to roughly 7 to 8 percent.
Now, that growth story is under direct threat.
The situation has exposed a fault line between two competing imperatives. Gulf governments, determined to project calm, have been pressing the private sector to reopen and resume business as usual. The UAE president’s visit to Dubai Mall on Monday night and the swift reopening of malls serve that objective. But international luxury groups headquartered in Paris, Milan and Geneva are watching a very different media cycle — one dominated by missile strikes and airport closures — and the instinct has been safety first, with some keeping stores shuttered well after local companies reopened.
By Tuesday, the picture was beginning to converge: most major boutiques in the UAE and Saudi Arabia were operational, while Kuwait and Qatar reopened later in the day.
Even as stores reopened, foot traffic at Dubai Mall on Monday skewed heavily toward browsing — tourists, largely, with nowhere else to go — while Mall of the Emirates saw more transactional activity. Staffing remained thin, with many employees managing children at home or simply too anxious to commute.
Jelena Sokolova, senior equity analyst at Morningstar, said the stock market’s reaction was “exaggerated” given the region accounts for a mid- to high-single-digit share of luxury sales, but cautioned that “the situation in the region is highly fluid, and the duration of the crisis will be a significant factor.” She added that if the crisis persists, it could dampen Middle Eastern tourist spending in Europe, which has been a recent positive for the sector.
The broader economic picture compounds the uncertainty. Iran’s closure of the Strait of Hormuz has disrupted global shipping, airlines have canceled thousands of flights and insurance costs for Gulf transit have surged. U.S. President Donald Trump said on Monday the U.S. expected the operation to last four to five weeks. GCC foreign ministers have declared their right to self-defense. The UAE has recalled its ambassador from Iran.
For the luxury industry, the stakes extend well beyond the immediate disruption as missiles light up the skies over the region that many hoped would help offset offset weakness in China and deliver the sector’s next chapter of growth.
