Energy Shock Arrives: How the Iran Conflict Is Hitting Portuguese Households and the Economy

European natural gas futures surged more than 37 percent on Tuesday morning, reaching 61.30 euros per megawatt-hour — the highest level since February 2025 — as the ongoing US-Israel military campaign against Iran continued to disrupt Middle Eastern energy supply chains and threaten passage through the Strait of Hormuz. Brent crude oil climbed to approximately $82 per barrel, a rise of around 13 percent since the strikes began last weekend.

For Portugal, the consequences are already beginning to take shape. Fuel prices at the pump are expected to rise by between two and four cents per litre at the next Monday adjustment, according to analysts quoted by Dinheiro Vivo. The Economy Minister acknowledged on Sunday that the price surge is not good news and said the government would activate appropriate measures if necessary to keep the economy functioning — a reference to the price stabilisation mechanisms Portugal and other European governments have deployed in previous energy shocks.

The more concerning variable is natural gas. Portugal imports a significant portion of its gas as liquefied natural gas via tankers, which means its supply chain is less directly tied to the Strait of Hormuz than pipeline-dependent countries further east. However, global LNG markets do not function in isolation. When benchmark European prices rise — as they have sharply this week — the cost of all gas contracts rises alongside them, regardless of origin. Economists quoted by Expresso warned that the energy shock threatens Portugal but stressed that the ultimate impact will depend heavily on the conflict's duration and intensity.

"The question isn't whether the price of diesel rose 20 percent today," said Filipe Garcia, an energy economist, speaking to Dinheiro Vivo. "The question is whether it stays at those levels. What really matters is how long this lasts — because if it's quick, the impacts won't be severe."

Markets added another layer of complexity on Tuesday: Portugal's Lisbon stock exchange saw mixed trading, with Galp Energia — the country's dominant oil and gas company — rising sharply as investors priced in higher energy revenues. The PSI index overall moved modestly, but the divergence between energy stocks and the broader market illustrates the asymmetric nature of the shock: some sectors benefit while households and businesses bear higher costs.

The Portuguese government's toolkit for managing energy prices is more limited than it was during the 2022 post-Ukraine shock, when emergency VAT reductions and fuel tax suspensions were deployed. Public finances have since improved markedly, and while the government retains the ability to adjust excise duties, doing so permanently would create fiscal pressure the current administration has been careful to avoid.

For residents and households — including Portugal's large community of foreign nationals on fixed incomes or currency-sensitive arrangements — the key near-term question is whether higher fuel prices translate into broader inflation. Portuguese inflation had been moderating toward the 2 percent range. A sustained energy shock of the kind now materialising could push that upward by a full percentage point, according to estimates from Banco de Portugal economists, with consequences for everything from grocery prices to transport costs.

Mortgage holders, meanwhile, may find themselves in a more complicated position than during the initial ECB rate-cut cycle. If higher energy inflation causes the European Central Bank to pause its easing path — a scenario being discussed in Frankfurt — variable-rate borrowers who had been anticipating further relief could find that relief delayed or reduced.

For now, the government's position is watchful rather than active. The Economy Minister's assurances of intervention, if needed, are likely designed as much to steady confidence as to signal imminent policy action. The real test will come if Brent crude approaches or surpasses $100 per barrel — a threshold analysts at several investment banks consider possible if the conflict escalates to include Iran's key oil export infrastructure.