The luxury sector faces slower growth this year as the Iran war dampens demand in key markets like Dubai and Europe. Bain & Co cut its forecast for personal luxury goods to 2%-4% at constant currency rates, down from 3%-5% previously. The Middle East conflict disrupted tourism flows and shopping hubs, weighing on the industry's recovery.

AI-driven wealth creation could provide a buffer. Bain & Co partner Claudia D'Arpizio pointed to the SpaceX listing and upcoming US share sales from OpenAI and Anthropic as potential catalysts. The US remains luxury's largest market, and tech booms have historically boosted high-end spending. Paper millionaires from AI stocks may lift demand for watches, jewelry and other luxury items.

South Korea offers another bright spot. Samsung Electronics chip workers will receive average bonuses of about $340,000, lifting luxury demand in a market that influences global fashion trends. However, Europe struggles as the 'real sick patient,' with weak local demand and reduced US tourist spending in Paris and Milan.

Brands face a delicate challenge: attracting back 70 million middle-class shoppers who exited the market amid steep price hikes. D'Arpizio warned that luxury houses must balance messaging to avoid alienating aspirational customers while courting the ultra-wealthy.