Luís Montenegro announces Government measures as fuel prices jump after Iran conflict

In recent weeks, fuel prices have risen sharply, driven by the conflict in Iran. In response, Prime Minister Luís Montenegro announced a set of measures aimed at softening the knock-on effects on the economy.

Since the start of the conflict in Iran, the price of standard diesel has already increased by 28 cents per litre, while standard petrol has gone up by 14.4 cents per litre. As of yesterday, 18 March, the average price of standard diesel stood at €1.926 per litre, and standard petrol averaged €1.856 per litre.

Against this backdrop, the Government decided to introduce an additional support mechanism for professional diesel, while also keeping in place the temporary and extraordinary reductions applied to fuel prices.

Luís Montenegro’s Government measures to curb fuel-price impacts

Extra support for professional diesel and households

As part of the package for businesses, an extraordinary mechanism will be set up for professional diesel, aimed at passenger and freight transport. The measure provides an additional refund of 10 cents per litre, up to a maximum of 15,000 litres per vehicle, for three months.

Alongside this, the Government also announced that the subsidy for the solidarity gas cylinder will rise to €25, likewise for a three-month period.

Council of Ministers: further crisis tools

Today, Thursday, the Council of Ministers is meeting to approve further measures, including price limits in an energy-crisis context and protections for vulnerable consumers, ensuring a minimum supply. According to the Executive, these are solutions “already prepared”, now being applied to the current situation.

Even so, Luís Montenegro warned that “we cannot give up prudence and fall into the temptation of trying to please everyone, all the time, with unsustainable measures”. If the effects persist, he said the Government will “update the State’s responses to the extent necessary”.

Government measures currently in force

After sector forecasts pointed to historically large increases in fuel prices, the Government reinforced the extraordinary discount applied to ISP (the Tax on Petroleum and Energy Products). This week began with a total discount of 6.1 cents per litre for standard diesel and 3.3 cents per litre for standard petrol, which could increase next week.

This extraordinary cut to the ISP is combined with the mechanism in place since 2022, designed to cushion the impact of fuel price rises after Russia’s invasion of Ukraine. That framework partially reduced the tax applied to petrol and diesel and has been progressively adjusted in line with price movements.

What is driving this?

The increase in fuel prices in Portugal and across Europe is directly linked to escalating tensions in the Middle East, following US and Israeli attacks on Iran, which led to the closure of the Strait of Hormuz-one of the main routes for shipping oil from the Persian Gulf. Around 20% of global crude trade passes through this passage.

The effects continue to feed through into markets: Brent crude, the European benchmark, rose from roughly $72 a barrel before the offensive to more than $116 at the time this article was published.

If the situation does not change during the week, it is expected that fuel prices will keep rising or remain at this elevated level.