European Luxury Stocks Plunge on the Stock Market

The trading session on Wednesday 8 July will go down as one of the most difficult of the year on the Paris Stock Exchange. The cause was the announcement of the reinstatement of US sanctions on Iranian oil, the bombing of more than 90 Iranian military targets following several attacks on commercial vessels in the Strait of Hormuz – which Washington attributes to Tehran – and, ultimately, Iran’s decision to close the strait to shipping. This latest escalation in relations between the two countries led to a 2.18 per cent fall in the CAC 40, one of its worst trading sessions of the year.

The markets’ reaction was immediate and widespread. Oil prices surged by between 7 and 11 per cent over the course of two trading sessions, reaching $80 a barrel. Investors’ fears of a resurgence of inflation driven by energy prices caused the VIX (CBOE Volatility Index) – the US volatility index nicknamed the ‘fear index’ – to jump by 15 per cent.

Against this backdrop, and since the start of the year, luxury stock prices have not held up as well as before. That famous resilience which investors found so appealing has ceased to be a beacon in the storm. But this loss of confidence has set in gradually. The first signs of fragility appeared as early as 2023 with the end of the post-Covid recovery. Then, the slowdown in Chinese consumption worsened in 2024. In 2025, on the stock market, LVMH remained broadly stable, Hermès fell by 9 per cent whilst Kering’s share price surged by 26.34 per cent, even as the group’s turnover fell by 12 per cent (investors had welcomed in advance the restructuring measures initiated by the new chief executive, Luca de Meo, rather than penalising the results for the past financial year).

Since 1 January 2026, the correction has deepened further with the outbreak of war in Iran: at the close of trading on 8 July 2026, LVMH was down 24.8 per cent and Hermès 26 per cent since the start of the year, whilst Kering limited the fall to around -16 to -18 per cent.

But what is new, since the start of 2026, can be seen in the Hermès group’s share price. Until recently an exception, holding its ground despite geopolitical tensions, the Hermès group’s share price has not held up and has shown its direct sensitivity to global upheavals. Between 1 January 2026 and today, 9 July 2026, Hermès International’s share price has fallen by around 24.4 per cent, dropping from approximately €2,104 at the close of the previous year to €1,590.50 during today’s trading session. This decline represents a loss in market capitalisation of nearly 40 billion euros, bringing its total value down to around 168 billion euros. The causes, as with other major luxury brands, are falling sales in the Middle East, waning interest from aspirational Chinese customers and negative currency effects. And as with all assets sensitive to the economic cycle, investors are turning away from them.

The renewed tension in the Middle East is therefore a problem the luxury sector will have to contend with for longer than anticipated. As around 30 per cent of global luxury goods purchases are made by customers travelling abroad, any disruption to air travel or consumer confidence in this region has a direct impact on luxury brands.