Spain’s government has approved an ambitious package of 80 emergency measures worth €5 billion to cushion the economic impact of the war in Iran, as rising oil and gas prices put pressure on households and businesses.
Prime Minister Pedro Sánchez announced the plan following an extraordinary Cabinet meeting, describing the response as immediate and necessary to shield families from another energy-driven price surge.
According to the government, Spain is “better prepared” to face this shock thanks to fiscal discipline and years of investment in renewable energy. The measures aim to lower fuel and electricity costs, protect vulnerable households and support key industries heavily exposed to energy prices.
Fuel VAT slashed to 10%
One of the headline measures is a reduction in VAT on fuel from 21% to 10%.
The tax cut is expected to:
- Reduce pump prices by up to 30 cents per litre, depending on the fuel type
- Save drivers an average of €20 per tank
- Be reinforced by a reduction in hydrocarbon taxes to the EU minimum
Unlike the fuel discount scheme introduced after Russia’s invasion of Ukraine, this time the government is opting for a direct tax reduction rather than a per‑litre subsidy.
Electricity and gas bills also reduced
The crisis package includes a VAT cut on electricity bills, lowering the rate from 21% to 10%.
Additional measures include:
- A 10% VAT rate on natural gas, firewood and pellets
- An extension of enhanced electricity social discounts throughout 2026
- Strengthening of the thermal social bonus
- A ban on cutting essential energy supplies for vulnerable households
- A freeze on maximum prices for butane and propane
The goal is to prevent energy costs from spiraling as global markets react to tensions in the Middle East.
Direct aid for transport, farmers and industry
Sectors that depend heavily on fuel will also receive targeted support.
The government will provide:
- €0.20 per litre in direct fuel aid to transport operators, farmers, fishermen and livestock producers
- Financial assistance for the purchase of fertilizers
- An 80% reduction in electricity grid tolls for energy‑intensive industries, generating an estimated €200 million in savings
Tax incentives for solar panels and EV charging
To reduce long-term dependence on imported fossil fuels, the plan also includes income tax deductions for installing:
- Solar panels
- Heat pumps
- Electric vehicle charging points
The government says these incentives will help households lower consumption and accelerate Spain’s energy transition.
Controls to prevent excess profits
The package introduces controls on corporate profit margins to ensure companies benefiting from tax cuts do not raise prices unfairly.
Spain’s competition authority (CNMC) will receive expanded powers to supervise and sanction businesses that take advantage of the crisis.
Rental Contract Extension
In a separate but related decree, the government approved a two-year extension of current rental contracts — a measure previously used during the inflation crisis — aimed at providing housing stability during economic uncertainty.
A €5 billion shield against energy shock
With 80 measures and €5 billion mobilised, Spain’s response combines tax cuts, direct subsidies, consumer protections and industrial support to soften the blow of the Iran war on the domestic economy.
As global energy markets remain volatile, the government says the priority is clear: protect households, contain inflation and maintain economic stability.
