Will the Middle East–U.S. Conflict Impact the EU Watch Market?

by Bruna Matilde Guaccio June 23, 2025

In times of global uncertainty, markets respond—not just in oil or stocks, but in the subtler, often overlooked realm of luxury goods.

With rising geopolitical tensions between the Middle East and the United States, the European watch industry now faces a complex mix of challenges and opportunities.

From currency volatility and supply chain disruptions to shifts in consumer sentiment, this unfolding situation could quietly—but significantly—reshape how watches are bought, sold, and valued across the EU.

⏳ Short-Term Effects

1. Flight to Safety (and Gold Watches)

In times of geopolitical tension, investors often seek tangible assets like gold, however Spot gold dropped about 0.4%, reaching $3,354.03 per ounce—a decrease triggered by a stronger U.S. dollar despite rising geopolitical tensions.
Gold watches (e.g., Rolex Day-Date, Patek Philippe Nautilus in gold) may see a rise in demand, especially from buyers looking to hedge against uncertainty.

2. Currency Fluctuations

A major international conflict could strengthen the U.S. dollar (The U.S. dollar index rose about 0.12% today 23 of June amid safe-haven demand from geopolitical tensions) and Swiss franc.
This would make Swiss-made watches more expensive in euros, discouraging some European buyers.
Volatility might also reduce consumers’ confidence in discretionary spending (for example, Consumer confidence dropped 2–5 points in EU indices during the Ukraine conflict).

3. Supply Chain Disruptions

A regional escalation that impacts major trade routes (e.g., Suez Canal or air routes over the Middle East) could slow down delivery of watch parts and finished products.
Brands relying on exotic leathers or oil-based components might also face material shortages or delays.

🏦 Mid-to-Long-Term Effects

4. Weakened Consumer Confidence

Economic uncertainty during extended conflicts tends to reduce spending on luxury goods.
European consumers may delay or cancel purchases of high-end watches.

5. Reduced Tourism

Cities like Paris, Milan, and Geneva rely heavily on Middle Eastern and American tourists for luxury watch sales.
A deteriorating global security situation could hinder international travel, resulting in lower boutique traffic and sales.

6. Inflation and Rising Costs

Energy prices often spike during regional conflicts, which can fuel inflation across Europe.
Central banks may raise interest rates to combat inflation, further reducing consumers' disposable income.

💼 Industry Response

Watchmakers might cut back on production to avoid oversupply in a softening market.
The secondary (grey) market could see a surge in listings as singular collectors look to free up cash.
Retail discounts or delayed product launches may become more common.

📈 Potential Upside for Niche Buyers

Collectors and long-term investors may take advantage of the instability to acquire rare or undervalued pieces.
Buyers might rush to purchase watches before any VAT increases or import restrictions driven by heightened national spending on defense or energy security.