Diesel and gasoline prices in Portugal have risen for two consecutive weeks, and were expected to climb further as this week's price update took effect Monday, driven by a fresh spike in Middle East tensions that has pushed Brent crude back above $85 a barrel. The timing is pointed: the European Central Bank meets Wednesday and Thursday in Frankfurt to decide whether to raise interest rates again, just six weeks after its first hike since 2023.
Fuel prices, rising again
As of Friday, July 17, the average liter of diesel cost €1.853 and gasoline €1.915, according to Direção-Geral de Energia e Geologia data, with diesel alone up nearly 19 cents over the prior two weeks. Estimates ahead of Monday's update pointed to a further rise of roughly 12 to 13 cents for diesel and 5 to 6 cents for gasoline, which would push diesel above €1.97 a liter and gasoline close to €1.98, both nearing the €2 mark. Portugal has a fuel-tax adjustment mechanism that triggers a temporary cut to the ISP tax when weekly pump-price increases exceed 10 cents, a cushion the government has activated repeatedly in recent months, though it hasn't fully offset the rise.
A fragile ceasefire, and oil back above $85
The current run-up has been driven largely by renewed concerns over Middle East supply risks, tracing back to the war between Iran and Israel and the US that began in late February, which included a closure of the Strait of Hormuz, a passage carrying roughly a fifth of the world's oil and gas trade. A US-brokered 60-day framework agreed June 21 eased pressure briefly. Renewed attacks since then have pushed Brent crude back above $85 a barrel, undoing much of that relief and reviving the conditions that pushed the ECB to raise rates in the first place.
The ECB meets this week, and a rate surprise is back on the table
The rate decision responds first to eurozone-wide inflation, not any single country's figures. The European Central Bank raised its three key rates by a quarter point on June 11, its first increase since September 2023, after annual inflation across the eurozone hit 3.2% in May, its highest since 2023, driven largely by energy costs. That reading has since cooled: Eurostat's final figures, confirmed July 17, put June's eurozone inflation at 2.8%, down from May, though still well above the ECB's 2% target. The June figure also came in below the 3.2% the ECB itself had projected for the quarter, giving policymakers some room to argue the worst has passed, at least on paper.
Most analysts expect the ECB to hold its deposit rate at 2.25% this Wednesday, with a further hike seen as more likely in September; a TD Securities note this month said as much, and ECB officials speaking ahead of the pre-meeting quiet period played down urgency, saying they'd seen no clear signs yet of inflation spreading into wages and broader prices.
But the fresh rise in oil prices has revived talk of a surprise move. ING economist Carsten Brzeski argued that Brent's return above $85 a barrel brings back the same backdrop the ECB faced before June, and that the bank has tended to lean toward a more restrictive stance when energy shocks threaten to unmoor inflation expectations. Markets tracked by ECB Watch had priced in roughly a 37% probability of a hike at this week's meeting, rising to about 55% for September, a real, if still minority, chance of a move this week.
The bigger picture: inflation came down a lot, then reversed
Zoomed out, the honest story isn't simply "inflation is up" or "inflation is down", it's that Portugal fought inflation back down to near the ECB's target through 2024 and 2025, and this year's energy shock has reversed much of that progress, as the chart above shows. Portugal's harmonized inflation rate (HICP, the measure used to compare across the EU) averaged 5.3% in 2023, eased to 2.7% in 2024, and eased further still to 2.2% in 2025, right in the zone the ECB considers comfortable. Then 2026 happened: from a low of 1.9% in January, it climbed almost every month, hit 3.3% in April, and has held at 3.1% through May and June.
That reversal is why the stakes around this week's ECB meeting are higher than a routine monthly data point would suggest. Markets had increasingly expected the ECB to pause after June's rate increase; renewed energy-price pressure has made that outlook less certain. Portugal's own inflation figures show why markets are watching this week's ECB meeting more closely than they were just a month ago.
What this means if you live here
Most Portuguese mortgages are variable-rate mortgages linked to Euribor, which has already been climbing on hike expectations: the 3-month rate is nearing 2.5%, its highest level since early 2025, even before this week's decision. A hold from the ECB would likely mean a pause in that climb; a surprise hike would push it further. Rising fuel costs also filter into the broader cost of living beyond the pump, from transport fares to the price of delivered goods.
Portugal was actually one of only four eurozone countries, alongside Spain, Lithuania, and Cyprus, where inflation didn't ease in June at all, holding flat at 3.1% while the eurozone average dropped from 3.2% to 2.8%. Both readings predate the current fuel run-up. For now, the ECB is making its decision using June data. By the time July's inflation figures arrive at the end of the month, policymakers and borrowers alike should have a much clearer picture of whether the latest rise in fuel prices is becoming a broader inflation problem, or just another short-lived energy shock.