The shockwaves from the military offensive launched by the United States and Israel against the Iranian regime are unsettling international markets, particularly amid instability in the Strait of Hormuz, through which roughly 20 per cent of the world’s oil supply passes, although it is still too early to predict the full impact the conflict in Iran may have on the Portuguese economy.
Higher energy prices are likely to be the first consequence felt by Portuguese consumers. “We are facing a situation of significant instability in the global oil and gas marketplace. Portugal is a price-taker in international markets, and there is clear upward pressure on oil, natural gas, and refined products, with all the nervousness that entails, including knock-on effects on inflation and whatever may follow,” Nuno Ribeiro da Silva, an energy specialist, told national newspaper Diário de Notícias.
The former chairman of Endesa, the largest Spanish multinational electric utility company, does not believe there is any immediate risk to strategic reserves, whether of oil or raw materials. Instead, he argues, the most immediate consequence will be higher bills.
“It is not expected that there will be physical supply cuts or lack of access to raw materials, oil or gas. However, we will inevitably be hit by rising price trends. Markets opened yesterday with oil up 13 per cent, before correcting slightly to around 9 per cent, which suggests we are not in a critical scenario. It is worrying, but not critical. Disruptions and deregulation in oil markets are more concerning for Asian countries, the primary destination for Middle Eastern exports, than for Europe,” he notes.
For Ribeiro da Silva, time is the decisive factor. “Everything depends on how long the conflict lasts. Every passing hour, every headline, every drone directed at Saudi Arabia only heightens market anxiety. If we suddenly had a scenario in which this ended without further damage, oil prices would fall sharply, potentially below 70 dollars a barrel. But as infrastructure damage mounts and uncertainty grows about how this will end, that uncertainty becomes fuel for further price rises.”
Filipe Garcia, economist at Financial Market Informations (IMF), agrees that rising petrol and diesel prices are the clearest and most immediate sign of what may lie ahead in the coming fortnight.
“Although Portugal does not use Iranian oil, if global oil prices rise, we are affected all the same, and the same applies to refined products. Petrol and diesel were up around 20 per cent today,” he explains.
Garcia does not anticipate “major logistical constraints” for the Portuguese economy, noting that the country imports oil and gas from other regions, including Nigeria and the United States.
As for electricity, the main impact is likely to fall more heavily on businesses than on households. “Most domestic customers are on longer-term contracts. Price increases will be felt more acutely in industry and among entities without fixed tariffs. But again, everything depends on whether this situation persists, and for how long,” he says.
Portugal’s strong position in renewable energy production is highlighted by the experts interviewed as a significant shield in times of global instability, such as the one that is currently ongoing. “It provides comfort and mitigates our exposure, particularly in electricity generation, through greater use of renewables such as solar, wind, hydro and biomass. Meeting our electricity needs with domestic renewable resources acts as a protective factor, because it reduces the need, at certain hours of the day or year, to rely on gas-fired power stations. The more we can generate from endogenous renewable sources, the less exposed we are to importing natural gas to meet electricity demand,” Ribeiro da Silva explains.
Garcia shares this view, stressing that without Portugal’s current level of renewable output, fluctuations in natural gas prices would have a far more pronounced impact.
“At the moment, we are beginning to produce slightly more, with longer daylight hours. Wind output may be weaker than it was a few weeks ago, but a small storm is forecast, which could help. Hydroelectric reserves remain reasonably healthy. The fact that renewable generation is higher undoubtedly helps to cushion these effects,” he says.
Three days into the armed conflict in Iran, firm conclusions remain elusive. Assessing the long-term implications for Portugal’s growth outlook would be premature. “There are many moving parts in Portuguese growth. Following the recent storms, a new stimulus programme was announced, which supports growth. But if fuel prices remain elevated for a prolonged period, the trade balance will deteriorate, dragging down GDP. Everything depends on the duration of the conflict,” Garcia says.
“The issue is not that diesel has risen 20 per cent on international markets today, it is whether those levels persist or climb further. What truly matters is how long this lasts. If it is short-lived, the impacts will be far less severe,” he adds.
The economist also considers it too early to forecast the effect on inflation, recalling the sharp price increases following the outbreak of the war in Ukraine in 2022.
“There was some opportunistic behaviour by certain producers and economic agents, who raised prices beyond the increases they themselves faced. That invasion drove inflation significantly higher. It would be premature to say we are heading in the same direction, but the initial signs point that way. Although the scale is not comparable, the first reaction has been a very sharp rise in energy prices,” he observes.
Despite the uncertainty, some opportunities may emerge, particularly in tourism. Garcia believes Portugal could position itself as an alternative holiday destination for travellers reconsidering plans to visit regions closer to the conflict zone. “There will undoubtedly be less appetite among some tourists, especially at this time of year, when summer and Easter holidays are being booked, to travel to that part of the world. Dubai and Turkey, while not at the centre of the conflict, are geographically close, as are Mediterranean destinations such as Cyprus and Greece. Portugal could stand to benefit from that shift,” Garcia concludes.
Source: DN
