Swatch Group Warns Middle East Conflict and Strong Franc Threaten 2026 Sales

The headline number is hard to argue with. Swatch Group's net income fell 88.6% in 2025, collapsing to just 25 million Swiss francs, and that was before CEO Nick Hayek stood before investors and journalists on March 18 to warn that the Iran conflict was now cutting into the Middle East business his company could least afford to lose. With more than 200 stores across the region, Swatch draws 5% to 10% of total sales from that geography, Saudi Arabia excluded, from tourists and locals who shop in an entirely different register during Ramadan. The end-of-Ramadan trading window, one of the most lucrative periods on the regional retail calendar, arrived that week under a cloud of conflict. Hayek was unambiguous: the situation "will certainly have an impact."

Pile on a Swiss franc that has strengthened 15% against the dollar since the start of 2025 and U.S. tariffs adding 30% to 40% to the landed cost of new Swiss watches, and the picture is less a crisis than a structural reset. The group's operating profit dropped from CHF 304 million in 2024 to CHF 135 million last year, less than half. Foreign exchange variations alone carved CHF 308 million from Swatch's results. Shares have fallen about 16% since the conflict in the Middle East began. Hayek defended his company's policy of holding production capacity and inventory rather than cutting: "We want to retain flexibility," he told journalists at the company's headquarters, acknowledging that it sometimes comes at the expense of profitability. What he did not say, but what the numbers imply, is that the pressure on new watch pricing is real and building across the entire Swiss industry.

For the kind of buyer who thinks in decades rather than quarters, this environment rewards patience and a clear set of principles. When geopolitical friction reduces luxury tourism traffic and franc strength inflates the retail price of new Swiss timepieces, value migrates. It does not disappear.

Right now it is moving toward the pre-owned market. A strong franc means Swiss manufacturers face squeezed margins on export sales denominated in dollars or euros; to protect those margins, they will raise list prices, restrict supply, or both. A stainless steel Rolex GMT-Master II bought at retail for $10,700 in 2020 was already fetching upward of $17,000 on the secondary market by 2025. New-watch price increases driven by franc appreciation and tariffs will continue to widen that gap, but a certified pre-owned piece has already absorbed market cycles. For a considered buyer, purchasing from a reputable authenticated dealer offers the watch at a price that reflects real secondary market demand rather than boutique pricing elevated by currency math.

Steel sport watches, the Rolex Submariner, the Patek Philippe Nautilus, and the Audemars Piguet Royal Oak among them, have held value better than nearly any comparable luxury good because they thread two audiences at once: the collector tracking secondary market premiums and the wearer who simply wants something robust enough for daily life. Patek Philippe produces approximately 60,000 watches per year across all references. Fixed, constrained supply against growing collector interest is not a speculative thesis; it is arithmetic. The Nautilus and Aquanaut in particular maintained or appreciated on the secondary market even after the broader hype cycle cooled. Chrono24's secondary market data from 2025 showed Rolex settling back to its pre-pandemic role as a market anchor rather than a speculative asset, which is precisely when the brand becomes most interesting to a serious buyer.

But not every situation calls for a sport reference on a bracelet, and this is where old money sensibility parts ways with the flip-watch crowd. Four durable principles clarify the decision.

Case size is the first filter. Thirty-six to 40 millimeters remains the well-dressed range for a watch that reads appropriately at a board table and a dinner table without adjustment. Anything pushing past 42 millimeters reads as a statement rather than an instrument, and old money does not make watch statements. The Calatrava, the Datejust in 36mm, the Omega Constellation in its cleaner earlier configurations: these are references in both senses of the word.

Strap choice is the second filter, and it functions as a style diagnostic. A watch on well-grained dark leather signals restraint and formality; on a Jubilee or Oyster bracelet, it signals sport and ease. Knowing which register a watch was designed for, and refusing to force it into another, is the clearest mark of an informed buyer. A steel Datejust on a Jubilee bracelet is one of the most undervalued propositions in watchmaking. A dress watch crammed onto rubber for downtown credibility is something else entirely.

Dial restraint is the third filter. Busy dials (contrasting chapter rings, multiple subdials, date plus day windows on a watch that is not actually a grand complication) create visual noise that ages badly and prices poorly. The most durable dials in the secondary market solved a specific problem elegantly: a black lacquer face with applied hour markers and no date, a silver opaline dial with leaf hands, a champagne register with a thin seconds track. These age with the wearer rather than against them.

Servicing is the fourth filter, and the one most buyers underweigh before purchase. A standard Rolex service for a sport model runs in the range of $800 to $1,000; Patek Philippe service costs run meaningfully higher for complicated references. Build the service interval into the cost-of-ownership calculation before finalizing any purchase.

The concrete scenario for right now: a certified pre-owned steel Rolex Submariner from a reputable authenticated dealer represents better value in the current environment than a new entry-level dress watch from a mid-tier Swiss brand at post-franc, post-tariff sticker pricing. The Submariner's supply is not growing, the reference has seven decades of service history, and the maintenance infrastructure behind it is the deepest in the industry. The mid-tier new dress watch carries franc risk in its retail price, limited secondary market depth, and a new-watch premium that this particular moment in monetary history is actively inflating.

Hayek's insistence on retaining flexibility, holding inventory and capacity through a downturn to be positioned for the rebound, reflects a manufacturer's logic. The buyer's version of that same logic is simpler: accumulate knowledge now, move on pre-owned when the moment presents itself, and buy the watch you intend to wear for 20 years rather than the one the market is briefly excited about. Disruption creates noise. Old money knows what it wants before the noise starts.