Luxury stocks saw a sharp uptick after a proposed Iran-U.S. deal outlined a reopening of the Strait of Hormuz and lifting of U.S. oil sanctions, according to Iran state media on Friday.
Shares of LVMH, Gucci-owner Kering, and Hermes were up about 5%. Swiss group Richemont rose about 3.4% while the pan-European Stoxx 600 index rose 1.8%.
Luxury stocks across the board have been hard hit by the Iran war, as the Middle East was a fast-growing market for the otherwise largely muted sector. The war broke out in late February, just as the sector had begun to show signs of recovery after a years-long slump prompted by soft demand from Chinese consumers, formerly one of the sector’s main growth drivers.
The war has weighed on sales of many luxury brands, even as the region accounts for a mid-single-digit percentage of the average of total sales.
Analysts have flagged that the risk to revenue lies not only in muted activity in the region itself, but also in reduced tourist flows and a hit to the so-called “feel-good factor” where consumers decrease discretionary spending amid a gloomier economic outlook.
In April, LVMH flagged a 1% negative impact from the Iran war in the previous quarter, cutting quarterly organic growth in half, as the conflict overshadowed underlying improvements.
The following week, CEO Bernard Arnault warned of a “world catastrophe” if the conflict in the Middle East was not resolved, saying it may result in a serious negative impact on the world economy.
Luxury stocks fell amid the Iran war.
The tentative peace deal between the U.S. and Iran includes a commitment from Iran to reopen the Strait of Hormuz. The effective closure of the narrow waterway, which normally carries around a fifth of the world’s oil supply, has led to global economic ramifications, with energy prices soaring and an uptick in inflation.
The 14-point memorandum of understanding is subject to finalization.
President Donald Trump said in a social media post on Thursday that the U.S. had made “a great settlement of the war,” but caveated that it was subject to the “finalization of documents.”