Conflicts in the Gulf region will have an impact on the Portuguese economy mainly through prices, and could also put pressure on public accounts, particularly after the shock caused by the storms, economists point out to Lusa.
“The most visible impact of the conflict will be on fuel prices and also electricity”, Ricardo Amaro, lead economist for the Eurozone at Oxford Economics, told Lusa, adding that there are still “several scenarios on the table at the moment”.
The estimate for a barrel of oil is close to 80 dollars in the next quarter, but with a return to January levels in the summer, he noted, “with the annual average remaining at 68 dollars per barrel, just slightly above the 65 dollars predicted by the government in the State Budget”.
Still, there are risks that could increase the effects, depending on the duration of the conflict or the possibility of a more aggressive impact in the short term, “particularly if Iran manages to suspend circulation in the Strait of Hormuz for a prolonged period”, he warned.
In addition to energy prices and possible disturbances in supply chains, “there is also a need to consider possible impacts on financial markets and/or consumer and business confidence that could intensify the economic impact of the conflict”, admitted the economist, although noting that the Portuguese economy “has reduced its dependence on oil over time and is today less vulnerable to possible increases in its price”.
Economist Ricardo Ferraz, professor at ISEG and Lusófona, also highlighted to Lusa that “there are high risks that we could be penalized for this war, but everything will depend on its duration”, and a prolonged conflict would lead to accelerations in inflation rates.
“If this inflation proves persistent, this will lead the monetary authorities to increase interest rates again, with a recessive impact on the economy and employment (at a time when the euro zone remains fragile and when the main engines are stubbornly unable to start)”, he noted, which would weigh on the Portuguese economy, when it is still “trying to recover from the shock of the storms, which seriously affected part of our companies, especially in the highly exporting area of Leiria”.
The coordinator of NECEP – Católica Lisbon Forecasting Lab, João Borges de Assunção, pointed out to Lusa that the effect on the Portuguese economy is “mainly via trade balances with abroad, as in the short term it does not seem to pose problems in terms of physical deliveries”.
In analyzing the conflict, Xtb also highlighted that the most immediate macroeconomic impact is on inflation, starting with energy — more expensive fuels and electricity — and quickly spreading to food and, later, to services.”
“If the escalation continues for several months, this pressure on prices could anchor higher inflationary expectations, leading the European Central Bank (ECB) to adopt a more restrictive monetary policy, that is, maintaining or increasing interest rates”, the analysis reads.
With regard to public accounts, Ricardo Amaro pointed out that there are contradictory effects, and “high prices penalize economic activity, but this is partly offset by the effect of inflation that increases VAT and ISP revenues, for example”.
Even so, he assumes that it is “likely to return to deficits in 2026, but more due to the effect of the package announced after the storms at around 1% of GDP”. “But we expect a slight deficit, as the better starting point for 2026 after the better performance than expected in 2025 will partially offset this increase in spending”, he said, noting that there should, even so, be a further decline in the public debt ratio, which will be below the European average in 2026 for the first time since 2004.
Ricardo Ferraz also assumed that maintaining a fiscal surplus in 2026 “has become much more challenging due to the storms, namely their negative economic effects and the support granted”.
“This war now adds even more uncertainty to this outcome, although it is not known how or when it will end. In any case, it does not seem possible to say that a budget surplus scenario is completely ruled out”, he concluded.
João Borges de Assunção signaled, in turn, that the impact on the budget balance “will only be indirect via economic activity and a prolonged period of high prices would be necessary to begin to have a direct material effect”.
The economist considered that it is still possible to end the year with a fiscal surplus, although highlighting that it is “normal for there to be a slight deficit, which does not put the sustainability of public finances at risk.”
There is still a lack of clarification from the Government on the concrete dimension of the reconstruction effort after the storms, to assess the final impact on this year’s budget balance.
Xtb also reported an effect on “increasing state costs in terms of defense and security as military spending or financing of external operations grows.”
“For the Portuguese economy, this could translate into slight pressure on public accounts and a possible need to reorient fiscal priorities, even if the direct impact is limited in relation to the size of the economy”, the analysis reads.
Lusa
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