Not every luxury brand collapsed when the Middle East crisis hit during Ramadan. The difference was borrowed growth.
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I should say upfront: I don’t own a Birkin bag. I’ve never been inside a Hermès store, and luxury brands are genuinely not my world.
But what happened to luxury brands during the Middle East crisis in March 2026 is one of the clearest illustrations I’ve seen of something I think about constantly in my work: what happens when growth is built on favorable conditions rather than genuine understanding.
In March 2026, escalating conflict in the Middle East forced luxury brands to close stores across the Gulf region. Louis Vuitton, Gucci, Burberry were all hit by the same disruption, right in the middle of Ramadan.
The timing couldn’t have been worse. Ramadan is the highest-revenue shopping period of the year across the Gulf, and stores in Dubai, Riyadh and Kuwait City were closed through most of it. According to CNBC, the conflict wiped out over $100 billion in market capitalization from major luxury companies within weeks.
Hermès, Rolex and Loro Piana kept growing.
Who held, and why
The easy explanation is that these brands serve wealthier customers who are more resilient to disruption. That’s partially true, but it misses what actually matters.
Hermès, Rolex and Loro Piana are three very different brands with one shared logic. None of them have ever tried to be for everyone. The Birkin waitlist, Rolex’s scarcity model, Loro Piana’s quiet craftsmanship with no logo in sight: these are not marketing tactics but the result of a sustained decision not to dilute who they work for, even when it would have been easy and profitable to do so.
Staying focused isn’t a constraint for these brands. It’s the foundation everything else is built on.
Then there’s Ferragamo, and this is perhaps the most instructive case of all — not because of the Middle East crisis specifically, but because of what the brand is doing while others are trying to recover from overextension.
Ferragamo had spent years trying to be too many things to too many people, and it shows in the numbers: revenues fell 5.7% in 2025 and the company posted a net loss. But the second half of 2025 already looked different. Management refocused on what Ferragamo actually is – a shoe and leather goods house – closed around 70 underperforming stores, and pulled back from wholesale channels that compromised the brand.
In the Americas and parts of Asia-Pacific, the DTC (direct-to-custimer) channel is now growing in double digits. The Ferragamo story matters because it shows that this kind of clarity can be rebuilt, even after it’s been lost. It isn’t a privilege reserved for brands that got it right from the beginning.
Louis Vuitton and Gucci made a different decision. For years, the model was premium for everyone: aspirational buyers welcome, logomania as a growth engine, rapid price increases as the primary lever.
McKinsey had already flagged this in their State of Luxury report in January 2025, noting that between 2019 and 2023, price increases alone accounted for 80% of luxury growth. That works, until it doesn’t. The rapid expansion led to overexposure, weakened exclusivity, and left brands dependent on conditions staying stable.
When the conditions changed, that strategy was the first thing to break.
What Ramadan revealed
What makes the Middle East crisis particularly revealing is following: for many of the luxury brands that struggled, these markets were never a strategic core but an attractive addition. These brands were present because the purchasing power was there, and they had stores because the locations were good.
But had you understood what these markets actually mean to the people in them?
Ramadan is not simply a shopping season. It is one of the most significant religious and social periods of the year for hundreds of millions of people. Brands that understood this deeply had already adapted their collections, built communications that reflected the season’s meaning, and developed customer relationships that extended well beyond the transactional. When the disruption came, those relationships held.
Brands that had marked Ramadan as a peak revenue window in the annual calendar found themselves with closed doors and no meaningful foundation in these markets beyond logistics and location. The disruption didn’t create that gap – it just made it visible.
Borrowed growth
There is a kind of growth that functions beautifully in stable conditions and collapses when those conditions shift. I call it “borrowed growth”. You expand because the context allows it: markets are open, purchasing power is strong, competitors haven’t moved yet, and no one is asking difficult questions about whether the foundation is real.
The numbers move in the right direction and the strategy looks sound.
But the foundation is missing. A genuine understanding of who your strategy is built for, in which cultural and market context it works, and what holds it together when the environment changes.
The luxury sector is not a special case – it’s just an unusually visible one right now. The same pattern appears in technology companies that enter new markets without translating what they offer, in service businesses that win international clients on price rather than genuine relevance, in any organisation that has expanded its audience so broadly it no longer serves anyone with real depth.
McKinsey noted that the luxury sector lost around 50 million customers between 2023 and 2024, in large part because rapid expansion had eroded the very qualities customers were paying for.
Growth borrowed from favorable conditions eventually has to be repaid. The bill tends to arrive at a difficult moment.
The question worth asking
After March 2026, the question I keep returning to isn’t how the luxury sector recovers. It’s the same question I ask in every market context I work in: do we actually know who our strategy is built for? Or have we defined our audience so broadly that when things get difficult, we aren’t really serving anyone?
Geopolitics answers that question fast. Better to answer it first.
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Sources
CNBC. (2026, March 27). Iran war wipes out $100 billion from luxury stocks. https://www.cnbc.com/2026/03/27/iran-war-wipes-out-100-billion-from-luxury-stocks.html
McKinsey & Company. (2025, January 13). The state of luxury. https://www.mckinsey.com/industries/retail/our-insights/state-of-luxury
Lifestyle.INQ. (2026, April 6). This 2026, the luxury market is shifting to brands that bank on emotion. https://lifestyle.inquirer.net/560836/luxury-market-2026/
Zargani, L. (2026, March 11). Ferragamo focuses on DTC growth, core leather goods, footwear and retail optimization. WWD via Yahoo Finance. https://sg.finance.yahoo.com/news/ferragamo-focuses-dtc-growth-core-205953977.html
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