LONDON – Luxury stocks took a hit on Monday morning and are set to come under even more pressure, while consumer confidence will be dented as a result of renewed conflict in the Middle East, according to RBC Capital Markets.

In late morning trading on Monday, March 2, Burberry, Salvatore Ferragamo, Kering, Richemont, LVMH Moët Hennessy Louis Vuitton, Brunello Cucinelli and other big luxury names were down 3-6 percent following the U.S. attacks on Iran over the weekend.

In a report early Monday, equity analyst Piral Dadhania said that, going forward, the bank is expecting “stocks to be under pressure given luxury demand typically requires a ‘feel good’ backdrop, supportive consumer confidence, positive wealth creation and unabated traveler flows, all of which will be negatively impacted at least in the short term.”

His analysis followed the U.S. strikes on Iran, which killed the country’s supreme leader and longtime dictator Ali Khamenei, and top government officials. The conflict quickly escalated across the region to Israel, Abu Dhabi and Dubai, the most important consumer market in the Middle East.

Hundreds of civilians have been killed as a result of both the U.S. and Israeli strikes and counter attacks by Iran. Commercial air space is shut down, and U.K. and U.S. bases have been suffering attacks in the region.

Dadhania said the stronger U.S. dollar should ultimately benefit eyewear giant Essilor Luxottica, jeweler Pandora, and luxury goods companies, while it will be negative for sporting goods on a lagged basis.

The bank added that it is tilting its stock preferences towards more “defensive names,” including Essilor Luxottica, Nike, and Hermès “all of which have strong balance sheets and generate heathy cash flow.”

It said luxury companies such as Swatch Group, Richemont and LVMH are more highly exposed to the conflict, while non-luxury companies are less so.

“Luxury demand relies on positive consumer confidence and constructive outlook of one’s future prospects, as well as the consumer experience, which is often less transactional and more emotional. Conflict, shock, uncertainty and fear are not helpful in this context and can have a short-term impact on luxury demand,” Dadhania wrote.  

“Further, traffic in Dubai is absent, with residents remaining indoors in recent days. Depending on the extent of this curfew this could have an impact on revenue generation in the most important consumer market in the Middle East,” he added.

Dadhania also said post-Ramadan travel to Europe may be affected. The timing of this conflict is during Ramadan, the holiest month of the Islamic lunar calendar, observed by Muslims worldwide. Ramadan is due to end on March 18.

“Given the timing of the Iran War conflict, and the current grounding of commercial flights, there may be a reluctance for Middle East consumers to travel post Ramadan in 2026 which would likely negatively impact a portion of luxury consumption in Europe,” he wrote.

The RBC report added that supply chain disruption for east-west shipping will hit sporting goods in particular.

“If the Strait of Hormuz shipping lane is disrupted for a prolonged period, this would be negative for [Nike, Adidas and Puma] which source product from Asia that is then shipped to Europe through this route. If the cost of cargo insurance, cargo freight rates and need for air freight increase, then this would have negative impact on gross margins,” he wrote.

Separately, oil prices are set to surge, according to media reports here, with brent crude hitting $82 a barrel on Monday due to tankers being blocked from passing through the Strait of Hormuz. That will translate into a spike in fuel and energy costs, boosting inflation and increasing business costs.

The FTSE 100 was broadly flat in late morning trading on Monday, while the CAC 40 index of top European stocks was down 1.4 percent.