LVMH CEO Bernard Arnault warned Thursday of “world catastrophe” if the conflict in the Middle East is not resolved.
His comments came after the Iran war weighed on demand in the first three months of the year, halving the luxury giant’s sales growth.
“The world is now in a pretty serious crisis in the Middle East,” the longtime CEO told shareholders at the company’s Annual General Meeting in Paris.
“Either it’ll be a world catastrophe with very serious and very negative economic impact – in which case, who can say how 2026 will unfold – or it will be resolved more rapidly in some shape or form that we all hope for, even if it doesn’t seem to be easy, in which case, business will recover and resume their normal course,” he said, according to a translation by LVMH.
Organic sales at the world’s largest luxury company grew 1% in the first quarter. The Middle East conflict had a 1% negative impact on organic growth, LVMH said last week, effectively cutting quarterly growth in half.
If a solution can be reached between Iran, the U.S. and Israel, however, Arnault expects to see a return to growth in the second half of this year.
His comments come as many of LVMH’s peers also faced a hit to sales in March, weighing on both quarterly earnings and shares.
The conflict comes at a particularly precarious time for the luxury sector, which had been largely expected to return to growth in 2026 after a year-long slump – a recovery that is now in jeopardy.
“The Middle East was one of the hot spots for growth… what I am hearing from our clients is that there is a double whammy of consumer sentiment declining, traffic declining, and spend declining,” McKinsey Senior Partner Gemma D’Auria told CNBC.
In the short term, brands will be impacted by the conflict, which is significantly reducing traffic in the region, D’Auria said. “It is yet to be seen whether this decline would be compensated for by Middle East clients shopping elsewhere outside of the Middle East.”
This is a breaking news story. Please refresh for updates.
