Prices at pumps set to rise due to renewed Middle East hostilities

With various sources today already suggesting fuel prices at the pumps will be rising again next week, the government has admitted ‘concern’ over the economic impact of the latest resurgence of tensions in the Middle East.

New attacks launched by the United States and Israel – and tit-for-tat responses by Iran on military bases in the Gulf – are creating a “highly uncertain and volatile situation”, Finance minister Joaquim Miranda Sarmento has acknowledged today.

“A few weeks ago, when an agreement was signed, we all expected that the conflict would end, that traffic through the Strait of Hormuz would return to normal, and that, as a result, the price of oil might fall to pre-conflict levels, with the same effect on petrol and diesel,” he told Portuguese journalists in Brussels as he arrived for a meeting of the Eurogroup.

But now, “the situation is highly uncertain, and always very volatile; if we return to a state of conflict and a rise in oil prices, this will naturally have consequences for the economy that we will actively manage,” he stressed, adding: “Let us hope that everything can be resolved quickly.”

It is almost certainly the hope of the entire world that everything can be resolved quickly – but in Portugal’s case, this sudden return to ‘complete uncertainty’ coincides with the drawing up of the State Budget, for debate and subsequent approval in the autumn

“The 2025 budgetary situation, having turned out better than anticipated, has given us a little leeway, but we must act in accordance with how circumstances develop,” Miranda Sarmento conceded, leaving the subject there.

What is certain is that Portugal has announced that it will benefit from the relaxation of the European Union’s budgetary rules proposed by the European Commission to accommodate energy expenditure – a measure that allows Member States to increase public investment in areas such as energy and energy security without such expenditure affecting compliance with the EU’s deficit and debt rules.

When asked what measures might be included, Joaquim Miranda Sarmento said: “this is a discussion that will now have to take place with the Commission”.

“Our expectation is that, naturally, the support measures that have been decided upon, such as the ISP [fuel tax], support for agricultural diesel, support for diesel fuel for transport companies and passenger transport companies providing public services, meaning they cannot pass on the rise in fuel prices to their customers, and support for fertilisers; we expect all of this to be included in the escape clause,” he ventured.

Citing figures from around a month ago on the budgetary impact of the Portuguese measures, published by the European Commission, the minister said the figure was close to 0.2% of gross domestic product, if no further measures are adopted.

In mid-June, the government announced that it was drafting legislation to introduce taxes on the windfall profits of energy companies, as announced in May, and that it would subsequently submit the document to parliament.

Today, however, Joaquim Miranda Sarmento told journalists in Brussels that the government was still “analysing this possibility”.

“We will make decisions later,” he said.

Source material: LUSA