Shares shifted sharply on Friday as 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 . LVMH, Gucci-owner Kering, and Hermès were up about 5% , a dramatic reversal for a sector that has been battered since the war erupted in late February. For LVMH shareholders, the question is whether geopolitics alone explains the stock's pain — or whether this rally papers over deeper cracks in global luxury demand.
A War That Cut Growth in Half
The Middle East conflict reduced LVMH's Q1 organic growth by around 1 percentage point , dragging overall organic growth to just 1% — below the 1.5% Wall Street expected . Sales at Dubai Mall reportedly plummeted by up to 50% . Although the Middle East accounts for only about 6% of LVMH's total revenue, the company warned that the profit hit exceeds that share because the region carries historically high margins . Removing that drag could meaningfully boost the bottom line when LVMH reports half-year profits in July.
The Deal Is Far from Done
U.S. and Iranian negotiators, with Pakistani mediation, reached agreement on the final text of a draft deal on June 12 , but President Trump insisted that the terms circulating in Iranian state media "have NOTHING to do with the terms that were agreed to, in writing" . Remaining hurdles include verification mechanisms, full implementation, and factional approvals in Tehran . Investors bidding up LVMH are pricing in a resolution that may still collapse.
The Bigger Problem Isn't Geopolitical — It's Structural
The war broke out just as the sector had begun showing signs of recovery after a years-long slump prompted by soft demand from Chinese consumers . LVMH has been dealing with weaker sales and softer store traffic for several years; in fiscal 2025, total revenue fell 5% year over year . U.S. sales grew 3% in Q1 and Asia ex-Japan rose 7%, but the core fashion and leather goods division — home to Louis Vuitton, Dior, and Fendi — declined 2% . Peace in the Gulf helps, but it doesn't fix sluggish spending worldwide.
What the Stock Price Already Tells You LVMH had lost roughly 27% year-to-date before Friday's bounce, per CNBC. At $513.40, the stock is still far below where analysts like Bernstein's Luca Solca see fair value — he cut his target to €600 (~$707) while maintaining an Outperform rating . The gap between today's price and that target suggests the market still doesn't believe in a full recovery. A signed deal could narrow it; another headline reversal would widen it fast.