The UAE's position as a global luxury hub faced an abrupt test this year after retaliatory attacks by Iran in late February targeted the UAE, Saudi Arabia, Bahrain and Kuwait following US and Israeli strikes on Tehran. LVMH reported the conflict dented first-quarter organic growth, while Kering saw sales fall 11 percent in the quarter, with the region accounting for roughly 5 percent of its retail revenue. Auction previews halted, the Doha Jewellery and Watches Exhibition moved to autumn, and Formula 1 races in Bahrain and Saudi Arabia were cancelled.

The tourism-dependent nature of Dubai's luxury economy proved devastating. Consultant Achim Berg noted hotel occupancy dropped 90 percent, with some hotels closing sections entirely. "Most brands have an exposure of between 5 and 10 percent in the region; for some brands up to 15 percent," he said, warning Q1 figures represent only "the tip of the iceberg" since they capture only March effects. Berg expects second-quarter results to be significantly worse, as tourists have largely disappeared and the region entered its summer season earlier than usual.

Yet some see opportunity amid the disruption. With western jurisdictions tightening tax regimes, the UAE's appeal as a wealth haven may be strengthening—Henley & Partners reported net inflows of around 9,800 high-net-worth individuals in 2025. Jewellery designer Meghna Zome noted clients are consolidating spend into fewer, more significant acquisitions, while 77 Diamonds reported strong interest in engagement rings and bespoke pieces. The market is shifting from tourism-driven volume to resident-focused value.