Portugal proposes diesel subsidy to mitigate Iran war energy cost

By Sergio Goncalves

LISBON, March 27 (Reuters) - Portugal proposed a temporary subsidy of 10 euro cents per litre on diesel for key sectors such as agriculture and transport on Friday to ease fuel cost increases due to the Iran war.

The subsidies could cost up to 450 million euros ($519 million) over three months, but will only apply if diesel prices remain more than 10 cents above the average for the first week of March, when the war in Iran intensified, the government said.

The subsidies, which will run from April 1 to June 30 and still need parliamentary approval, will support sectors such as agriculture, forestry, fishing, public transport and taxis, and will be capped at a fixed diesel consumption limit per vehicle.

Prime Minister Luis Montenegro said the support was temporary and highlighted the need to continue managing the state budget responsibly and prudently.

Portugal posted a wider-than-expected budget surplus of 0.7% of gross domestic product last year, up from 0.6% in 2024, the National Statistics Institute (INE) said on Thursday. It forecast a surplus of 0.1% in 2026.

The government is studying additional support measures should the conflict in Iran escalate and put further pressure on fuel and essential goods prices, Montenegro said.

There are no plans to reduce VAT on fuels or food, he added.

($1 = 0.8675 euros)