The rise in fuel prices caused by the war in the Middle East sent the cost of living soaring in Catalonia and Spain in March, the first month with the war's effects, according to consumer price index (CPI, the indicator that measures the cost of living for families) data published this Tuesday by the National Statistics Institute (INE).

Sometimes, a good social response is not a good political response. Lowering VAT on fuels is one of the most common responses –and best received by citizens– when the cost of living rises, as we are experiencing due to the outbreak of the war in Iran. Its effect is immediate and visible and, for this very reason, it often becomes one of the options taken by governments. However, as Brussels has warned, which has questioned Sánchez's reduction, not only its legality but also its effects must be called into question. To what extent have these types of measures become an almost automatic response to episodes of inflation without taking into account their costs and benefits, compared to other less conspicuous, but perhaps more effective, political alternatives?It is not difficult to understand why VAT reductions are attractive. In a context like the current one, marked by rising fuel prices, reducing VAT translates directly into a lower price at the petrol station. It is an easy-to-explain measure, which reaches everyone and is immediately perceived, making it particularly tempting for governments. But this same simplicity is also its limit: not all households benefit equally, and they often end up benefiting those who consume the most. Furthermore, by artificially lowering the price, the measures reduce the incentives to adjust consumption in a context where energy prices remain high and with no clear prospects of reduction., the measures reduce the incentives to adjust consumption in a context where energy prices remain high and with no clear prospects of reduction.They are not, therefore, isolated cases. Our tax system has been accumulating a set of benefits – reduced and super-reduced VAT rates, deductions and exemptions – which, far from forming a coherent system, reduce its revenue and the system's redistributive capacity. They are mechanisms that reach many but often redistribute little, and that end up functioning more as generalized discounts than as instruments of social policy. In this context, there is growing consensus on the need to review these tax benefits and strengthen more direct and better-oriented instruments.The problem is not the lack of instruments, but how we use them. We prioritize visible measures that help diffusely, while the most effective ones often do not arrive. The challenge is not to add more aid, but to ensure that those that work are the ones that are applied. Whether they are popular or not.

The war in Iran does not impact our economy due to our economic and commercial relations with the area, but rather due to the effect on energy markets, especially oil and gas, which it has and will have in the near future. What truly weighs is not Tehran on our trade and our prices, it is Hormuz. We only need to recall the advanced CPI figure for March, 3.3%, one point higher than in February, with no change in the underlying inflation and, therefore, due to the increase in energy prices, in a context of weak growth in Europe and a not negligible slowdown of about one point in Spain and Catalonia, where the average citizen does not perceive growth improvements, per capita income does not change, and where the Treasury will be one of the beneficiaries of this higher inflation given that it does not correct tax progressivity (essentially income tax).

The US economy has been feeling the effects of the war in the Middle East and the escalating price of oil for some time now. The Consumer Price Index (CPI) in March confirms this and reveals how the impact of the conflict and the closure of the Strait of Hormuz is reaching the pockets of Americans, as it soared to 3.3%, the highest level since May 2024. This rise coincides with market forecasts, which already expected a considerable escalation compared to February's 2.4% as a consequence of high gasoline prices.

The General Council of Economists, the body that groups the colleges of economists of the State, proposes that the Spanish government adjust its income tax bracket (IRPF) to the salary increases of recent years. According to the entity's calculations, a Catalan worker with a gross annual salary of 25,000 euros would save about 252 euros annually, while for higher salaries, such as 400,000 euros, the savings would exceed 2,100 euros annually.

Until 2022, and for more than 10 years, a hamburger chain sold one of theirs for 1 euro. Today, one costs 1.85. This is one of the clearest examples of inflation. And your salary, has it increased by 85% in 3 years? This is one of the best examples of the loss of purchasing power.

Only in two of the last twenty years – in 2008, under the government of José Luis Rodríguez Zapatero (PSOE), and in 2015, under Mariano Rajoy (PP), which was actually a tax reform –, the Treasury has deflated the income tax (IRPF) rate, which means adjusting it to inflation to prevent paying more tax despite having the same or lower real income. And the last two times similar measures were taken was before the call for general elections, in March 2008, in which Zapatero was re-elected for a second term, and in December 2015, when Rajoy repeated in office. Between doing it and not doing it, there is an essential difference: from 2019 to 2024, it has meant additional revenue for the State of between 9,700 and 16,700 million, according to various studies. From the left-wing space, led by the PSOE, it is considered that this type of adjustment advocated by the PP and which applies to all incomes, especially benefits the highest ones. And, therefore, they advocate for more selective and direct measures for low or middle-income families, such as reductions and rebates on public transport and others.

The war in Iran has once again put inflation at the center of economic debate. As already happened with the invasion of Ukraine, the rise in energy prices is beginning to spread to the rest of the economy and is once again straining the cost of living. The OECD announced this week an increase in inflation of around 3% for this 2026.

No one could have imagined, when the US and Israel launched the first attacks against Iran on Saturday, February 28, that especially Washington and, specifically, US President Donald Trump, had not foreseen the consequences. The evolution of events makes it increasingly clear: there was no strategy. At least, not on the part of the US. Another thing is the government of Benjamin Netanyahu, which takes advantage of the opportunity to achieve its expansionist goals, with no regard for international law and human rights.

The conflict in the Middle East has not gone unnoticed in the update of the Bank of Spain's macroeconomic forecasts, despite the short timeframe between the outbreak of the war and the preparation of a new report. The supervisory body acknowledges that the attack by the United States and Israel on Iran and the ramifications in the region will have an impact on the growth of the Spanish economy, but above all on the evolution of prices. In fact, if the conflict becomes entrenched, the average inflation rate for 2026 could soar to 5.9% due to disruptions in the global energy market. However, the body chaired by former socialist minister José Luis Escrivá estimates that the package of fiscal measures from the Spanish government, which was validated by Congress this Thursday, will help to "cushion" the economic shock of a war that, for now, does not seem to have an end.validated by Congress will help to "cushion" the economic shock of a war that, for now, does not seem to have an end.In general terms, the Bank of Spain (BdE) forecasts that gross domestic product (GDP, the indicator used to measure the size of an economy) will grow by 2.3% in 2026, as indicated in the report published this Friday. This may seem contradictory because it represents a slight improvement compared to the December forecasts, i.e., the pre-war forecasts, when the entity forecasted that the Spanish economy would grow by 2.2% in 2026.

The war in Iran and the resulting increase in energy costs have impacted inflation in Spain. Thus, the cost of living for families this March has notably increased compared to February, as a result of the rise in prices of fuels and electricity.

The war in Iran and the resulting energy price increase have impacted inflation in Spain. Thus, the cost of living for families this March has become notably more expensive compared to February, as a result of the rise in prices of fuels and electricity.

Oil prices are rising again. Brent crude is hovering around $110 and has even touched $120. This isn't a one-off spike. It's a jump that could last for months.

For the third consecutive year, reality has exceeded forecasts for the Spanish economy. On average, 25 research institutions and departments calculated that Spain's gross domestic product (GDP) would increase by around 2.1%, while it ultimately grew by 2.8%, a difference of seven-tenths of a percentage point. Ceprede-UAM (Center for Economic Forecasting-Autonomous University of Madrid) and CEEM-URJC (Center for Economic Studies of Madrid-King Juan Carlos University) came closest to the final result, with a forecast of 2.5%, a deviation of three-tenths of a percentage point from the actual growth.

The US and Israeli attacks on Iran are already impacting people's wallets. The situation will worsen the longer the conflict lasts and the longer it takes to resolve the closure of the Strait of Hormuz, through which a fifth of the world's oil and gas passes. "Nobody knows what will happen tomorrow, but we do know that the risk is very high," says Javier Díaz-Giménez, a professor at IESE Business School. The problem is that we are in a context of uncertainty and volatility, adds Pedro Aznar, an economics professor at ESADE Business School.

Two weeks have passed since the start of the war against Iran. A conflict that has upended international flight patterns, global diplomacy, and the global oil supply. The disconcerting thing is that neither the United States nor Israel has communicated what would need to happen for the war to be considered won. This uncertainty is centered on the Strait of Hormuz, through which a fifth of the world's oil passes. Images of burning oil tankers summarize Iran's pressure strategy. If this passage is closed, the impact on the global economy is guaranteed, and Trump's promise to escort the ships—with a system that won't be ready until the end of March—only seems to confirm that the end is not as near as we would like. But it's not just oil: we must also consider its derivatives and other raw materials that pass through the strait. One of these is sulfur, essential for producing sulfuric acid, the most manufactured chemical in the world and indispensable for extracting copper and cobalt, which in turn are fundamental for electrical transformers, batteries, and data center infrastructure. Or nitrogen fertilizers, basic for global food production.

As the hours pass, more details are emerging about the measures the Spanish government is considering to address the energy crisis stemming from the war in the Middle East. While on Thursday, Economy Minister Carlos Cuerpo hinted at specific aid for the sectors hardest hit by rising fuel prices—agriculture and road transport, among others—on Friday, the Minister for Ecological Transition, Sara Aagesen, raised the possibility of reducing the government's VAT rate in 2021, when energy prices skyrocketed. "Yes, we are also considering this measure," Aagesen told the media on Friday morning. In 2025, the VAT on electricity returned to 21%, ending the tax reductions of recent years.

The cost of living for Catalan families rose slightly in February, despite remaining within the limits set by the European Central Bank (ECB). Last month was the last before the outbreak of the war in Iran, which is expected to have an upward impact on prices due to the resulting increase in the cost of oil and natural gas. Specifically, prices in Catalonia rose by 0.5% compared to January, a figure that stands out in contrast to the previous month, when the cost of living decreased compared to December. However, compared to a year ago, the growth was 2%, the same annual rate as in January, according to data from the Consumer Price Index (CPI, the indicator that measures the evolution of prices of consumer goods and services) published this Friday by the National Institute of Statistics (INE). Across Spain, the INE has confirmed the data that I had already shared two weeks agoThus, in Spain, prices rose on average in February by 2.3% compared to the same month last year and by 0.4% compared to January. The rise in inflation is mainly due to the increase in fuel costs, which is expected to be even more pronounced in the coming months, with a monthly increase of 1.7%. Tourism and hospitality also became more expensive in February, with an average increase of 1.2%.

The Spanish government wants to approve a package of measures "as soon as possible" to mitigate the economic impact of the war in the Middle East, which is already putting pressure on energy prices, particularly diesel and gasoline. Although the Second Vice President and Minister of Labor, Yolanda Díaz, stated this Thursday morning that some measures will be approved at next week's cabinet meeting, a more cautious approach prevails at the Moncloa Palace. "We are working to make it happen as soon as possible," government sources indicate. And the Minister of Economy himself, Carlos Cuerpo, publicly addressed the issue after a meeting with unions and employers' associations to discuss, precisely, the economic impact of the conflict: "The priority is to finalize the text, and I cannot give a date for its approval," Cuerpo said at a press conference.

The Spanish government is working on a package of measures to address the economic consequences of the war in the Middle East, especially the surge in energy prices. Meanwhile, employers' associations, unions, and various sectors of the economy are already presenting them with different demands, some of which share a common denominator: a tax cut. In fact, following the round of political talks between the Ministry of the Presidency and the parties in Congress, this Thursday morning it is the turn of the major unions and employers' associations: CCOO, UGT, CEOE, and Cepyme will meet with the Spanish government's economic ministers at the Ministry of Economy.