Luxury stocks were among the hardest hit sectors early Tuesday, with European markets heading for another day of losses as the conflict in the Middle East intensified overnight.

Shares of conglomerate LVMH, Gucci-owner Kering, and British outerwear maker Burberry were among the worst performers, with week-to-date losses approaching 10% each. The wider European blue-chip index, Stoxx 600, was down nearly 3% Tuesday, after falling 1.6% on Monday.

The Middle East has been a driver of growth in the sector, which is battling a difficult macroeconomic backdrop, and many formerly best-selling brands are struggling to resonate with consumers.

The region’s strength, however, hasn’t been enough to offset weakness elsewhere, notably in China, and industry giants like LVMH and Kering are still struggling to get sales back on a positive track.

“The Middle East has been one of the few bright spots,” Morningstar analyst Jelena Sokolova told CNBC. “You have one area which was small, but which was very, very vibrant, and it’s being affected now.”

The U.S. and Israel launched widespread attacks on Iran over the weekend that killed the country’s Supreme Leader Ayatollah Ali Khamenei. Iran responded with retaliatory strikes, and the conflict now engulfs the wider Middle East region with no clear endpoint in sight.

U.S. President Donald Trump has said the war could last for four to five weeks, but that it could go on “far longer than that.”

Shares of Richemont, the owner of Cartier, Van Cleef, and Chloé, fell heavily on Monday and Tuesday, with a relatively big exposure to the region. 

But even with Middle East revenue exposure on average in the mid- to-high single digits for luxury brands, repercussions could spread if a conflict lasts for weeks or even months.

“If people don’t go back to normal, and we have more issues when it comes to sourcing oil and gas from the Gulf, then the probability of a recession globally could be increasing, and that would definitely dampen discretionary sectors like luxury,” Bernstein analyst Luca Solca told CNBC. 

If the war carries on for another six months, during which oil is significantly disrupted, “then this is very bad news,” he added. 

The ‘feel good’ factor

Luxury stocks come under pressure during times of heighted geopolitical and economic uncertainty because demand typically requires a “feel-good” backdrop and supportive consumer confidence, analysts say.

“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,” RBC Capital Markets analysts wrote in a note to clients on Monday. “Conflict, shock, uncertainty and fear are not helpful in this context and can have a shortterm impact on luxury demand.” 

The impact on asset prices overall remains to be seen, but moves so far indicate that a hit, at least in the short term, is to be expected. 

There are massive uncertainties about a potential end to the conflict and when that would be, said Sokolova, however, also calling the market reaction “exaggerated” given the relatively small sales portion coming from the region. 

Travel disruption

Strikes between the U.S., Israel and Iran in the region have forced airlines to cancel thousands of flights. While some airlines said Monday they would resume a “limited number” of flights, aircraft remain largely grounded as the conflict enters its fourth day. 

The timing of the strikes also coincides with Ramadan, meaning that post-Ramadan travel may be disrupted if the conflict drags on. Travel from the Middle East after the month-long observance is predominantly to Europe, RBC said. 

“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.”

CNBC

U.S. crude oil on Friday posted its biggest weekly gain in futures trading history, as the escalating war in the Middle East has triggered a major disruption to global fuel supplies.

West Texas Intermediate futures surged 12.21%, or $9.89, to close at $90.90 per barrel. Global benchmark Brent rallied 8.52%, or $7.28, to settle at $92.69 per barrel.

U.S. crude soared 35.63% for the biggest weekly gain in the history of the futures contract dating back to 1983. Brent jumped about 28% for its biggest weekly gain since April 2020.

President Donald Trump on Friday demanded unconditional surrender from Iran, raising fears of a prolonged war that could wreak havoc on the global oil and gas market. The war has already brought traffic in the Strait of Hormuz, a critical shipping route for energy supplies, to a near standstill.

Qatar’s energy minister, Saad al-Kaabi, told The Financial Times on Friday that crude prices could reach $150 per barrel in the coming weeks if oil tankers were unable to pass through the Strait.

This could “bring down the economies of the world,” Kaabi said.

“Everybody that has not called for force majeure we expect will do so in the next few days that this continues,” Kaabi told the FT. “All exporters in the Gulf region will have to call force majeure. If they don’t, they are at some point going to pay the liability for that legally, and that’s their choice.”

The Trump administration on Friday announced a $20 billion insurance program for oil tankers in the Persian Gulf, though the measure did little to calm the crude market.

Iraq has shut down 1.5 million barrels per day of production, two Iraqi officials told Reuters Tuesday. Kuwait has also started cutting production after running out of storage space, people familiar with the matter told The Wall Street Journal on Friday.

“The market is shifting from pricing pure geopolitical risk to grappling with tangible operational disruption,” Natasha Kaneva, head of global commodities research at JPMorgan, told clients in a Friday note.

Production cuts could approach 6 million bpd by the end of next week if the Strait is not open to traffic, Kaneva said. JPMorgan expects the United Arab Emirates to show supply constraints next week.

The average price for a gallon of regular gasoline jumped nearly 27 cents in the last week through Thursday to $3.25, according to data from U.S. travel organization AAA

The war between Iran and the U.S. entered its seventh day on Friday. In a press conference on Thursday, U.S. Defense Secretary Pete Hegseth said the U.S. had “only just begun to fight.”

“Iran is hoping that we cannot sustain this, which is a really bad miscalculation,” he told reporters.

CNBC

The rush for the exits in private credit is prompting fresh scrutiny of the sector’s less-liquid structures and its rapid expansion into the retail wealth space.

Blackstone has become the latest fund manager to be hit by a surge in requests from investors to withdraw from its flagship private credit strategy.

The asset manager said this week it will meet 100% of redemption requests in its gigantic $82 billion Blackstone Private Credit Fund, or BCRED, after investors sought to pull a record 7.9% of assets from the fund, or about $3.8 billion.

That came after Blue Owl Capital said last month it was ending regular quarterly liquidity payments in its Blue Owl Capital Corporation II fund, a semi-liquid private credit strategy aimed at U.S. retail investors. The private credit specialist will instead switch to periodic payouts funded by asset sales, earnings and other strategic deals.

This spike in redemption requests is now putting the private market industry’s courting of retail investors under closer scrutiny, and bringing the mismatch between non-publicly-traded, higher-yielding illiquid assets and retail-style access into sharper focus.

‘A feature, not a bug’

Blackstone — the world’s biggest alternative investment manager, with $1.27 trillion in assets under management — said it was upping a previously-announced tender offer to 7% of total shares, with the firm and employees offsetting the remaining 0.9%, in order to meet the redemption requests in full.

Blackstone Chief Operating Officer and President Jon Gray acknowledged that the risk of private credit firms failing to meet withdrawals, and potentially gating investors’ money, is “not beneficial in the near term” for the sector.

But speaking with CNBC’s “Squawk On The Street” Tuesday, Gray said individual investors and financial advisors “in most cases do” understand the product.

“What people sometimes fail to recognize is, they’re designed as semi-liquid products,” Gray said. “The idea that there are caps is really a feature, not a bug of these products. What you’re doing is trading away a bit of liquidity for higher returns. That’s the same trade-off institutional investors have made for a long period of time.”

Shares of publicly traded alternative asset managers — including Blackstone and Blue Owl, as well as KKR, Ares Management and Carlyle Group, among others — have dipped as concerns over multiple pressure points in the sector have spread.

These include late-cycle loan quality, AI-related risks in software portfolios, and fears of further individual blow-ups following the First Brands and Tricolor implosions last year.

Gray said that lowly-leveraged loans which produce a premium for investors are “a pretty good place to be,” adding that he expects they will continue to outperform liquid credit.

The BCRED fund has generated a 9.8% return since inception in its main share class, which indicates that, for now, the challenge remains one of liquidity rather than performance. Gray said there had been a “ton of noise” around private credit in recent weeks, adding, “it’s not a surprise that investors can get nervous.”

Moody’s Ratings warned that private credit’s tricky balance between delivering outsized returns while also offering retail-like liquidity will continue to be tested as the sector evolves towards the mainstream. In a recent commentary, Marc Pinto, global head of private credit at Moody’s, said funds may need to hold a larger proportion of more liquid, lower‑yielding assets to account for a growing retail presence — which could prove a drag on returns.

’180-degree switch’

Ultimately, the underlying assets will remain illiquid, regardless of the fund’s structuring, said William Barrett, managing partner at Reach Capital. “The retail market has to be conscious of that and not invest in these products the same way it would in an ETF,” Barrett told CNBC via email.

“Private markets inflows have been dominated by the institutional market for decades,” Barrett said. “It makes sense for our industry to now offer our products to retail but we should probably test it first with HNWI [high net worth individuals] and mass-affluent segments rather than making a 180-degree switch to mass retail.”

Barrett said the industry has to carefully select the right target markets for the right liquidity structures and the right underlying assets.

He noted that while there has been little sign of underperformance in the credit space at the portfolio level, “it makes sense that semi-liquid products feel the liquidity pressure first.”

Man Group, the London-listed global alternatives manager which has expanded its private credit activity in recent years,said private credit loans are originated with the “express purpose” of being held to maturity.

“This lack of tradability is a feature of the asset class, not a flaw,” said Andrew Weymann, director, client portfolio manager, U.S. private credit, and Zeshan Ashfaque, senior managing director and senior credit officer, U.S. direct lending, in a note Tuesday.

They said redemption pressure in private credit could also be influenced by another area of weakness: exposure to software-as-a-service companies. Blue Owl is a significant direct lender to the sector, which has been shaken by concerns that rapidly advancing AI tools could erode traditional SaaS business models.

“If retail inflows slow and outflows pick up, particularly for managers most exposed to AI risks or whose capital bases have a significant retail component, this will be an additional headwind for the industry to contend with,” Weymann and Ashfaque noted.

CNBC