The Portuguese economy is a net importer of energy, which means that the balance of payments is likely to deteriorate as prices rise. The conflict could lead to a decline in consumption.
The Portuguese economy is not directly exposed to Iran and, in terms of energy, is in a more favourable position to avoid supply risks. However, all scenarios depend on the duration of the conflict in the Gulf, not least because rising oil prices have global effects, impacting economic activity. The uncertainty could extend to consumer confidence, leading to a decline in consumption and investment, whilst economists acknowledge the possibility of a budget deficit.
According to data from the National Statistics Institute (INE), Portuguese imports from Iran amounted to €527.7 million in 2024, having risen by 267.4% last year to €1,931.6 million. Portugal does not, therefore, depend on direct imports from Iran, unlike some Asian countries, which reduces the direct impact.
Even so, Iran was Portugal’s 148th largest supplier in 2024 and 129th in 2025. A closer analysis shows that, overall, Iran’s contribution to the growth of Portugal’s total imports is negligible.
In terms of products, agricultural and foodstuffs, plastics and rubber, and pulp and paper represent Portugal’s main purchases from that country, which arrive mainly by sea.
However, the Portuguese economy is a net importer of energy, which means that the balance of payments is likely to deteriorate in the face of rising prices. In 2024, the energy import balance stood at €5,747 million, according to the publication “Energy Bill” by the Directorate-General for Energy and Geology (DGEG).
This document states that the downward trend in the value of imports continued that year, with a 4.3% decrease compared to 2023. Crude oil, which accounts for the largest share in terms of volume and value, recorded an increase in 2024 of 14.3% in volume and 13.5% in value, calculated in euros, “reflecting higher consumption”.
However, the country is not particularly exposed to a physical disruption in supply and is characterised by a diversification of energy sources, with a strong emphasis on renewables. Lower energy dependence compared to other European countries also mitigates direct pressure on inflation.
This does not mean, however, that it eliminates it. As an economy integrated into global supply chains, Portugal remains exposed, since, for example, as oil has a global price, any price hike has direct effects on fuel prices, which has already been seen.
“We are affected in terms of price, as we are seeing, and then we have conditions which I would say, on balance, are favourable in terms of not being so exposed to the other potential problem, which is a physical disruption to supply”, says Nuno Ribeiro da Silva, an energy consultant.
Prices for Europe’s benchmark gas contract, the Dutch Title Transfer Facility (TTF), stood at €56.68/MWh on Monday, almost double the €31.96/MWh recorded on 27 February, the day before the first US and Israeli strike against Iran. At the start of this week, the price of a barrel of Brent crude was around $100, whereas on 27 February it stood at $72.29.
In the Iberian Peninsula, wholesale electricity prices – where producers sell electricity to suppliers and very large consumers – have already returned to levels around €35/MWh, slightly above the roughly €20/MWh recorded on 27 February. However, on 10 March, Portugal and Spain exceeded 130 euros/MWh.
In Portugal, international oil product prices have also affected prices at the pump: before the conflict, regular diesel and 95-octane petrol stood at 1.59 and 1.684 euros per litre respectively. On 22 March, the DGEG recorded an average price of €1.926 for diesel and €1.855 for petrol.
Furthermore, energy inflation is quickly passed on to consumers and affects business costs, particularly in the transport, industrial and agricultural sectors. In the 2026 State Budget (OE2026), the Ministry of Finance carried out a sensitivity analysis to external shocks. One of the scenarios studied involved a 20% increase in the price of oil compared to the $65.4 forecast for this year in the baseline scenario.
In the scenario outlined last October, the ministry led by Joaquim Miranda Sarmento estimated a 0.1 percentage point reduction in the economic growth forecast of 2.3%, “due to lower growth in consumption (owing to a fall in disposable income) and investment (as a result of rising production costs), partially offset by slower growth in imports”.
This scenario could be exacerbated if consumer confidence were to fall sharply. “If households and businesses, concerned about the geopolitical context, overreact and reduce consumption and investment as a precaution, the impact of the shock will be significant”, notes BPI’s chief economist, Paula Carvalho, in a research note.
The risk to private consumption is particularly heightened by the significant role it has played in economic growth in recent years. In 2025, Gross Domestic Product (GDP) grew by 1.9%, with the contribution of domestic demand to growth accelerating once again, rising from 2.9 percentage points in 2024 to 3.7 percentage points in 2025. This trend is explained primarily by private consumption, which grew by 3.5%.
The Ministry of Finance estimates, in the simulation carried out, that the private consumption deflator would increase by 0.3 percentage points. When considering the weight of oil-derived energy goods in imports, “this shock would lead to a deterioration in the trade balance and, consequently, in the economy’s external financing capacity by around 0.2 percentage points of GDP”.
However, the oil price assumed in this shock is lower than that incorporated by the European Central Bank (ECB) last week, as it was drawn up months before the current conflict. In the baseline scenario, Frankfurt estimates that the price per barrel will rise to $81.3 in 2026. However, in the adverse scenario it rises to $120 per barrel and in the worst-case scenario it climbs to $150 – which would exacerbate the simulated impact on the State Budget.
“Although the Portuguese economy is not expected to face supply issues, it will be affected by rising energy prices”, notes BPI’s chief economist. Paula Carvalho says that the average price of gas in 2026 is expected to stand at 58 euros/MWh, 20 euros higher than the previous year, whilst the average price of a barrel of oil is 20 dollars higher than in the previous year. She estimates that the effect of high oil prices will subtract 0.14 percentage points from GDP growth, whilst in the case of gas the effect is around 0.1 percentage points.
In a research note, the economist warns of a “highly heterogeneous” sectoral impact on the economy: the more energy-intensive industry would be the hardest hit – the association of energy-intensive industries has already requested support – whilst, on the other hand, in tourism, “the perception of a safe destination could offset the shock’s effect on demand”. Regarding inflation, she forecasts that “the expected moderation to 2.1% for the year as a whole may not materialise and could remain at higher levels, around 2.7%”.
What is certain is that abroad, macroeconomic scenarios are beginning to be revised, with institutions such as the ECB cutting their growth projections for the Eurozone.
And what about the budget balance?
The year 2026 was already set to be challenging from a budgetary perspective due to the impact of the Recovery and Resilience Plan (RRP) loans, but “the path has become even narrower” due to the storms that ravaged the country at the start of the year and now the war in the Persian Gulf. The warning has been issued by the Minister of Finance, Joaquim Miranda Sarmento, who has not yet provided updated estimates of the budget balance for this year.
Putting pressure on expenditure will be the mitigation measures taken by the Government (and those it may yet take), such as fuel subsidies, the increase in the gas cylinder subsidy from €15 to €25, or the support for commercial diesel over the next three months.
“Given that the projected balance was just 0.1% of GDP, and in light of statements by members of the Government, it is most likely that we will have a public deficit in 2026. Given the uncertainties surrounding the current crisis – this Monday alone saw very significant fluctuations in market prices in both directions – particularly regarding its duration, but also its intensity, it seems premature to put forward a forecast at this stage”, says Pedro Braz Teixeira, director of the research department at the Forum for Competitiveness, in comments to ECO.
However, the economist points out that “a greater or lesser economic slowdown, both domestic and external, is likely to reduce tax revenue and increase social security costs”. At the same time, he emphasises that scenarios of rising inflation coupled with an increase in the economy’s nominal expenditure typically mean higher tax revenues for the Government, which could therefore mitigate the impact on public finances in this way.
“Rising fuel prices may increase tax revenue, and it is highly uncertain to what extent the government will counteract this trend”, he notes. Putting further pressure on the accounts will potentially be “rising interest rates, which will affect interest expenditure”.
For his part, the coordinator of NECEP – Católica Lisbon Forecasting Lab, João Borges de Assunção, speaking to ECO, highlights that, in the case of storms, there could be “an increase in public spending and investment to help the affected regions and finance the reconstruction of public infrastructure”. However, the impact on economic activity could be relatively small in the context of the national economy.
“In the case of war in the Middle East, the effect on the Portuguese economy could be greater. But for now, before high-frequency indicators become available, it is premature to predict the scale and duration of the impact on the economy or the deficit”, he says. The economist admits that, broadly speaking, “the crises as a whole may have an impact of a few tenths of a percentage point on the budget balance and an essentially neutral impact in terms of the structural balance”. In other words, “only temporary and cyclical effects”.
Petroleum products dominate energy consumption in the EU and Portugal
A detailed overview of energy in the European Union reveals that, in 2024, petroleum products, including petrol and diesel, accounted for 37% of final consumption, followed by electricity (23%) and natural gas (20%). In fourth place is the direct use of renewables, i.e. when these are not converted into electricity, and firewood, solar thermal energy, geothermal energy or biogas are used for space heating or hot water production.
This accounts for 12% of consumption. Cyprus is the European Union country that consumes the largest share of petroleum products, at over 55%; Malta holds the ‘record’ for electricity, reaching 40.9%; and the Netherlands has the highest percentage of gas use, at 32.7%.
Portugal is above the European average for the use of petroleum products and electricity, but well below average for the use of natural gas. Compared with Europe’s two economic powerhouses, Germany and France, it consumes more petroleum products, whilst its electricity consumption exceeds that of Germany but is slightly below that of France, with the two countries almost neck and neck. As for gas, it is the ninth country to use the least, and is therefore less dependent on this fossil fuel than Europe as a whole, and France and Germany in particular.
Looking at the origin of imports in 2024, Portugal appears relatively sheltered from the conflict in the Gulf: for natural gas, most imports come from Nigeria, followed by the United States, then Russia and, finally, Trinidad and Tobago. None of the main partners are Middle Eastern countries. The same applies to France and Germany.
As regards petroleum products, Azerbaijan appears as the only country to the east from which Portugal imports, ranking fifth on the list of partner countries by volume, far behind the others.
France imports significant quantities from Kazakhstan and Saudi Arabia, and Germany from Kazakhstan and Libya, meaning they appear to be more directly vulnerable.
In an analysis note from Banco BPI, analysts point out that the share of energy imports reaching Portugal via the Strait of Hormuz is relatively low: around 7% for oil and less than 1% for gas.
“Our geographical location and our network of oil and gas suppliers, which are mainly based in the Mediterranean basin and North Africa, mean we are less vulnerable and exposed to the Gulf and the Middle East”, comments Nuno Ribeiro da Silva, whilst also pointing out that the country has “comfortable” reserves of both oil and natural gas.
Currently, 48% of the electricity produced in the European Union comes from renewable sources, and only 28% is produced using fossil fuels. In this “ranking”, Portugal is particularly well placed, with around 80% of its electricity coming from renewable sources.
It is the ninth country in the European Union that uses the least fossil fuel to generate electricity (14.3%), behind France, which ranks fourth (4.6%). Germany is only in 18th place, relying on fossil fuels to generate over 41% of its electricity.
Adding to these figures, Ribeiro da Silva highlights that Portugal is moving into a time of year with two contributing factors, particularly regarding natural gas consumption.
This consumption tends to fall, as temperatures are becoming milder and there is therefore less need for air conditioning, reducing the amount of natural gas required to generate electricity. At the same time, at this time of year, the availability of renewables is typically high, with the sun contributing increasingly and hydro and wind power still strong.
Ultimately, “it is highly unlikely that the supply crisis will have a significant impact on Portugal. If we were to face an actual shortage of hydrocarbons, the world would be turned upside down”, notes the same expert. As for the rest of the European Union, he shares the same view, although Portugal is in a more comfortable position by comparison.
Everything will depend, on the one hand, on how long the conflict lasts and, on the other, on “how we emerge from this skirmish”; that is to say: when the conflict ends, we must assess the condition of refineries, gas terminals, pipelines and ships that may have been destroyed or require repair. One factor in our favour is Iran’s limited interest in ‘turning off the tap’, as oil exports from this country are the population’s ‘bread and butter’.
