Portugal diesel to hit €1.988 as Middle East war escalates
Portuguese drivers face sharp increases at the pump next week as escalating Middle Eastern hostilities disrupt energy supplies, forcing Lisbon to activate tax relief and launch a regulatory probe.
Diesel and petrol prices in Portugal will rise sharply during the week of 20 to 26 July. Diesel is set to climb by 13.5 cents to €1.988 per litre, while petrol will increase by 6.5 cents to €1.980 per litre.
The price shock follows an escalation in fighting between the US, Israel, and Iran this week, which ended a provisional agreement to halt the conflict. The hostilities threaten the Strait of Hormuz, a route handling 20% of global oil and gas trade that was initially closed after the war began on 28 February.
For the broader European economy, the conflict highlights a persistent vulnerability to external energy supply shocks. Elevated fuel costs filter quickly into transport and logistics networks, putting upward pressure on inflation and squeezing margins for businesses across the continent.
In Lisbon, the government has pledged an extraordinary, temporary reduction in the Tax on Petroleum and Energy Products (ISP) whenever prices jump by more than 10 cents. Despite intense debate over cutting fuel VAT, Finance Minister Miranda Sarmento insisted on Wednesday that he will not change the tax rate.
Beyond immediate tax measures, authorities are questioning whether retailers are passing on market movements fairly. Environment and Energy Minister Maria Graça Carvalho has asked the energy regulator ERSE to investigate fuel prices charged since 2024.
In a letter sent on Thursday, Carvalho called for "a detailed study of the last two years - within 20 days - to explain why falls in oil prices on international markets take so long to be passed on to prices at the pump". The request signals growing political concern over retail margins during periods of volatility.
The projections from the Automobile Club of Portugal (ACP) and the Directorate-General for Energy and Geology (DGEG) are based on raw material prices at the close of markets last Thursday. The ACP cautioned that crude and fuel quotations could still fluctuate before Friday, potentially altering the final pump prices.
