War with Iran, Oil at $100 and What It Means for the Diamond Market

This blog first appeared in the March 9 Pressing Matters Executive Memo. Read the full memo here, Pressing Matters.

It’s been quite a week in the world. The situation in the Middle East raises the question of how the war with Iran might affect the diamond market, beyond the disruption to trading in Dubai and Ramat Gan, the two centers directly impacted by Iran’s attacks.

Those interruptions are unlikely to upset the immediate diamond supply-demand dynamic. Rather, the broader economic consequences of the conflict deserve closer attention. Two variables stand out: energy prices and the US dollar.

Oil surged above $100 a barrel over the weekend for the first time since 2022, as Middle Eastern producers cut output and traffic through the Strait of Hormuz, a major gateway for global oil supply, was effectively halted.

Higher oil prices feed into inflation, raising mining, manufacturing and transport costs, putting further pressure on midstream and downstream profit margins, while also squeezing household budgets. A rise in both the cost of doing business and the cost of living ultimately affects consumer spending, particularly on discretionary goods such as diamond jewelry.

At the same time, geopolitical shocks tend to strengthen the US dollar as investors move toward safe-haven assets. Since diamonds are priced globally in dollars, a stronger currency effectively raises prices for buyers in other markets. That can dampen polished demand even if underlying consumer interest remains intact.

The luxury sector is also watching developments closely. The Middle East has become an important market for high-end jewelry and watches, driven by both local wealth and tourism in hubs such as Dubai. A prolonged conflict that disrupts travel or weakens regional spending could ripple through luxury sales, especially for high-value pieces where Gulf buyers are significant participants.

The industry has seen this dynamic before. When energy prices rise, currencies weaken versus the dollar, and inflation picks up, retailers often experience slower traffic and consumers trade down, either choosing smaller diamonds or delaying their purchases. That pressure typically works its way back through the pipeline, tightening liquidity in the midstream and forcing manufacturers to be more cautious in their rough buying.

For now, the direct disruption to trading is manageable. The greater risk lies in how long the conflict lasts and whether it feeds into a broader economic slowdown. If energy prices remain elevated and financial markets turn volatile, the diamond industry could feel the effects on retail jewelry demand if the war drags on.

Image: President Donald Trump. (Credit: The White House)