2026 will be a year to forget for luxury At least according to the stock market

One of the methods used by industry insiders to gauge how the luxury market is faring is to analyze the so-called STOXX Europe Luxury 10 — the index that summarizes the performance of shares in the ten most important multinationals in the sector, including the French groups LVMH (which owns, among other brands, Louis Vuitton) and Kering (which controls Gucci, Balenciaga and Bottega Veneta). Since the start of the year, the value of the STOXX Europe Luxury 10 has fallen by more than 20%, recording one of the worst performances in the stock market in 2026.

In just over ten months, the luxury sector has seen a total loss of more than 300 billion euros in market capitalization (that is, the aggregate value of their shares). For many players in the industry, this represents their worst result ever. Moreover, the sharp decline in the share prices of individual multinationals has had knock-on effects on major brands, gradually spreading across the entire fashion industry.

Why the luxury sector is struggling

Among the factors underlying the crisis is a widespread rise in production costs, which is affecting a vast number of companies globally and is squeezing profit margins even within the luxury segment. Added to this is the decline in sales that has hit numerous companies in the sector.

To shield themselves from recent economic fluctuations, many brands have progressively raised prices on their products at rates exceeding inflation, directing their offering toward wealthier clientele — a strategy that has ended up excluding aspirational customers.

Another factor that has contributed to the sector's contraction is the slowdown in demand across Asian markets. China, for example, represented one of the luxury industry's primary growth drivers for years; however, the country's economic difficulties have gradually dampened the spending appetite of Chinese consumers. This trend has hit hardest those groups that had concentrated a significant share of their revenue in this region and now find themselves contending with a considerably weaker demand.

What the war in the Middle East has to do with all this

A further source of instability is the conflict in the Middle East, which has engulfed a strategically important area for the luxury industry. The countries of the Persian Gulf represent a particularly affluent consumer base, thanks to the wealth generated by the oil industry and the enormous capital invested in transforming cities such as Dubai into coveted destinations associated above all with prosperity. Over the years, the leading brands have embraced this image by expanding their retail channels and organizing initiatives tailored to the most exclusive local clientele. The war, however, has undermined precisely that sense of stability, casting doubt on the sector's commercial prospects as well.

The repercussions of the war in Iran are also being felt in tourism, a sector closely intertwined with the luxury market. Dubai itself is now trying to recover from the drop in visitors recorded in the wake of the Iranian attacks on the city, including through incentives offering residents hotel stays, dinners and experiences to give to family and friends. These difficulties reveal just how fragile an economic model built almost exclusively on the ability to attract wealthy individuals and international investment can be — a problem that indirectly affects fashion and luxury brands as well, for whom the region has long served as a major global showcase.