What: Shoppers have returned to Gulf malls since the conflict broke out in February, but fashion spending has not followed, with luxury sales weakening and shipping costs rising.

Why it is important: With international tourism subdued, Gulf retail now depends on resident consumers, which rewards retailers that invest in local relevance, value pricing and flexible supply chains.

Prada Group's Middle East retail sales fell 23% in the first nine months of 2026, and Hermès reported a 4.3% decline in the reporting region covering the Middle East. Premium international labels are most exposed, caught between selective luxury clients and cost-conscious shoppers. Lower-priced fashion has held up: Primark's three new Dubai stores drew record customer numbers, while Zara and value retailers such as Max, LCWaikiki and Koton report steady traction.

Some regional brands report shipping costs up to four times pre-conflict levels as disrupted sea routes force reliance on air freight. Most international carriers have not resumed GCC flights, and an attack on Riyadh's King Khalid International Airport cancelled nearly 90% of its flights. Bahrain's Touchless now ships international orders by road through Saudi Arabia, and Mrs Keepa is building production and inventory capacity in Europe to reduce its dependence on Dubai.

Kering reported a sequential third-quarter recovery in the region supported by resident spending. Mall openings continue, including Cenomi's Westfield Jeddah, opened in July, and The Avenues in Riyadh, scheduled for early 2027. Kloto Consulting expects 2027 to focus on margins, inventory and cash flow rather than expansion.

IADS Notes: Gulf malls are busy again after a spring of closures. In March, Chalhoub Group temporarily shut global brands' stores across the region (Reuters, March 2026), and falling tourist arrivals emptied Dubai's malls and forced luxury closures, reversing the resilience the market had shown in mid-2025 (Financial Times, March 2026). The value-led resilience was already visible that same month, when Primark and Ulta Beauty opened in the UAE to strong in-store demand despite the volatility (Forbes, March 2026). On logistics, the conflict had already disrupted sourcing and built up inventory backlogs, particularly in fast fashion, pushing retailers towards scenario planning (Inside Retail, March 2026). The turn towards resident shoppers also draws on a season brands were already investing in. Before the conflict, the Middle East luxury market grew 6% to $12.8 billion in 2025, and brands were treating Ramadan as a strategic retail moment with dedicated capsules and culturally fluent campaigns (WWD, February 2026).

Fashion spending lags in the Gulf as shoppers return to malls