The average price of a barrel of oil in 2026, already taking into account the current increase in costs caused by the war in Iran, should end this year at 68 dollars, that is, around three dollars (plus 4%) above the base hypothesis on which this year’s State Budget (OE 2026) is based, indicate analysts from the Morningstar DBRS rating agency. However, this eventuality is very broad and uncertain.
According to Andrew O’Conor, senior economist at DBRS specializing in energy and natural resources, “given the wide range of potential repercussions of the conflict, it remains uncertain whether the increase in prices will persist in the medium term and whether there will be a structural impact on the supply of oil and gas in the Persian Gulf”.
But there are signs that, within a year, the price will be higher, but not much higher. It is below 80 dollars, say DBRS analysts.
Therefore, economists decided to revise the average cost of Brent upwards to US$68 this year (estimated average for the period from January 1st to December 31st).
Speaking of the uncertainty and aggressiveness of this crisis, this Tuesday was a good example of that.
Prices rose again, a lot, the reference contract for natural gas (the Dutch TTF) rose more than 60% compared to the value recorded on the eve of the attack by the USA and Israel on Iran. In average terms, the price of gas has already risen by more than 52%.
In the case of oil, this Tuesday was very similar. During the session, the Brent contract for delivery in May reached almost 105 dollars, which translates into an increase of more than 46% compared to the day before this new war.
Looking at the State Budget approved for this year, the slippage is already significant and we are still only two and a half months from the beginning of the year.
According to DN calculations, the average per barrel of oil from January 1st until this Tuesday was already at almost US$73, 11% more compared to the US$65.4 assumed by Finance Minister Joaquim Miranda Sarmento.
In daily terms, the jump is much more aggressive. On the eve of the attack on Iran, a barrel of oil was worth US$70.75; currently, it is already at US$ 103.5, which gives the aforementioned appreciation of around 46% so far.
Assuming the average values so far, which allow a better comparison in relation to what the government expected when it made the 2026 OE, the aforementioned increase of 11% does not yet represent an existential danger for the Portuguese economy, nor for public accounts.
For now. The case will change if the war continues over time, which is an increasingly plausible scenario.
Within the Finance sensitivity scenario
According to the Ministry of Finance, a 20% increase in the price of oil in 2026, that is, around half of what has occurred so far, “compared to what was projected in the base scenario, would result in a reduction of 0.1 percentage points (pp) in the growth of the Gross Domestic Product (GDP) in 2026, due to lower growth in consumption (due to the fall in disposable income) and investment (as a result of the increase in production costs), partially mitigated by the reduction in import growth”.
“In this scenario, the private consumption deflator would increase by 0.3 pp” and “considering the weight of energy goods derived from oil in imports, this shock would lead to a deterioration in the trade balance and, consequently, in the economy’s financing capacity vis-à-vis abroad by around 0.2 pp of GDP”, “the unemployment rate would remain substantially unchanged”.
“In the main public finance aggregates, this shock [20%] would have a residual impact”, estimates the Treasury. What is understood: an oil shock tends to devastate the economy and purchasing power, but it is a source of revenue through ICMS and ISP, for example.
The same DBRS economist explains that the current future price of a barrel of oil for a year from now (March 2027) is relatively under control, despite the conflict.
“The 12-month futures contract (March 2027) for West Texas Intermediate (WTI) crude oil, the benchmark for the US, is around $72 per barrel, which suggests that the market sees little material change in fundamentals for now in the medium to long term.”
The same happens in Brent (the reference for Europe). The barrel for delivery a year from now has risen a lot, it is true, but only from 68 dollars on February 27th to 79 dollars this Tuesday.
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