As geopolitical tensions escalate in the Middle East, diamond industry analyst Paul Zimnisky warns that the impact is most acute at trading hubs like Dubai, where flight cancellations and travel fears are keeping buyers away.
While higher energy costs and inflation threaten consumer spending power globally, he argues the industry's biggest challenges remain structural.
In a wide-ranging interview with Rough&Polished, Zimnisky, an independent diamond and jewellery analyst and consultant based in the New York City metro area, stressed that natural diamond supply has dropped dramatically—down over 50 million carats annually in the past decade—and shortages of larger stones are already driving price momentum.
However, the broader market's recovery hinges on three critical factors: the fate of De Beers under new ownership, a coordinated marketing push to differentiate natural diamonds from lab-grown alternatives, and a fundamental shift in retail practices.
He warns that selling natural and lab-grown diamonds side-by-side as interchangeable products ultimately leads consumers to choose the cheaper option.
Zimnisky calls for immediate industry coordination, including regulations preventing LGDs from being displayed alongside natural diamonds or described as "identical."
With consumer spending under pressure, he said he hopes the new buyer of De Beers will have the budget and the skillset to reignite the industry.
NB: Zimnisky, CFA, has a leading subscription-based monthly industry report called “State of the Diamond is Market,” a widely tracked proprietary rough diamond price index called “The Zimnisky Global Rough Diamond Price Index,” and a popular industry-focused podcast called the “Paul Zimnisky Diamond Analytics Podcast.” All of this can be found at his website.
Below are excerpts from the interview.
How is the escalating conflict with Iran affecting rough diamond supply chains, particularly in terms of shipping routes, insurance costs, and delivery timelines from key producing countries like Botswana, Russia, and Angola?
I think the impact is most acute at trading centres like Dubai. The challenge is not necessarily getting the goods to market but getting buyers to come for sales, given flight cancellations and general apprehensiveness about travelling to the region at the moment.
Are we seeing any safe-haven demand for diamonds similar to gold during periods of geopolitical instability, or is the retail consumer too disconnected from that dynamic?
It's hard to say with diamonds. If that is happening, it's at the top end of the market. There was some of that happening in Russia a few years back, following the sanctions, where citizens were buying investment-grade diamonds as a store of value.
The reality is, even gold has sold off in recent weeks as the speculative bid has come out of the market, and some of those buyers are now generating liquidity where it is. When the fear gauge is cranked up like it is now, the correlation of almost every asset goes to one. This is why stocks, bonds, gold and crypto are all selling off. Cash is king when there is fear in the streets.
How has the Iran situation impacted the already fragile sentiment in the midstream, particularly in cutting centres like India, Surat, and Antwerp, where financing and inventory carry costs are already under pressure?
The macro implications are real. With oil surging, countries like India, which import most of their oil, are feeling a direct impact. This can be seen with the recent volatility in the rupee. So, this flows down to all businesses, including the diamond business.
The price of oil impacts everything; it's not just gasoline for cars. It's diesel, which directly impacts shipping costs for all sorts of goods. It's petrochemicals, fertilisers, the list goes on. And all of this impedes central banks' ability to lower interest rates. So, there is a knock-on effect to all of this for businesses.
Beyond the immediate geopolitical shock, what are the medium-term implications for diamond prices if the conflict leads to sustained higher energy costs, inflationary pressure, and weaker consumer spending in key markets like the US, China, and Europe?
In this case, I think the impact on consumer spending ability (and willingness) is the biggest sensitivity for the larger diamond industry. The current situation is clearly already impacting consumers globally, with fuel shortages even being reported in certain Southeast Asian regions. Higher cost of living translates into less discretionary income. On top of that, there is damage to consumer sentiment. After all, diamonds are a discretionary product.
Turning to the broader industry, where do you see the natural diamond market bottoming out? Are we approaching a supply-driven recovery, or will lab-grown diamonds continue to suppress pricing for lower-quality natural goods indefinitely?
It’s hard to overstate how much diamond supply has come down in recent years. We are down over 50 million carats (a year) over the last 8-9 years. You can see shortages of larger goods begin to result in upward price momentum in those categories. I think we could see a similar situation eventually play out in other categories. But the larger industry has to focus on driving demand for 1-carat polished goods, as this category has really been pushed aside due to consumers opting for, say, a 3-carat LGD instead.
With De Beers' sightholder list reportedly cut by a third, Anglo American advancing the sale of the business, and African producers coordinating on a potential Pan-African diamond company, how do you see the industry's ownership and distribution structure evolving over the next three to five years?
The future of De Beers remains a crucial catalyst for the industry. I really hope the new buyer has the budget and the skillset to reignite the industry. A lot hinges on this.
How significant is the Luanda Accord's delay in launching the promised marketing campaign for natural diamonds? Is the industry missing a critical window to differentiate natural diamonds from lab-grown in the consumer's mind?
Larger industry marketing should be the diamond industry's number one focus. And not just traditional marketing, but winning back the narrative that natural and LGD are different products that can be distinguished with certainty. A starting point would be to regulate the way the natural product has to be sold. For example, at retail, LGD cannot be displayed side-by-side with natural diamonds, and LGD cannot be described to consumers as "identical" to natural diamonds.
What are the most underappreciated risks and opportunities for the diamond market in 2026 and 2027 that investors and industry participants should be watching closely?
I continue to believe that natural diamonds will have a revival, but the industry needs to really coordinate to protect the integrity of diamonds as a luxury product. This means thinking longer term and being consistent. By selling natural and LGD as fully interchangeable, it results in the lowest common denominator, i.e. the customer ultimately choosing the LGD. The reason LGD is desired is that consumers associate it with the historical perception of natural diamond. Without rare and valuable natural diamonds, LGD is arguably just another common, inexpensive jewellery material that sells at fashion jewellery price points. The industry can't lose sight of what's at stake here. I don’t think retailers will forever be able to sell LGD for thousands of dollars a carat when it can now be bought at wholesale for under $100 a carat. So, it’s really time to start thinking a little longer term.
Mathew Nyaungwa, Editor-In-Chief, Rough&Polished
