For many residents of Gipuzkoa, the geopolitical tremors that began in the Middle East on February 28, 2026, first arrived not as a news headline, but as a shock at the fuel pump and a higher figure on a monthly bank statement. The military strike by the United States and Israel against Iran has rapidly transitioned from a distant strategic conflict into a tangible economic burden, driving up the cost of living in Gipuzkoa in a matter of weeks.
Although the initial volatility was expected, the speed with which these costs permeated the local economy has caught many by surprise. The pressure is currently most visible in three primary areas: transport fuels, home energy, and variable-rate mortgages. Yet, economists warn that these are early indicators of a broader inflationary trend that could soon reach the grocery aisles of the Basque Country.
According to Massimo Cermelli, a doctor of economics at the University of Deusto, the current situation differs fundamentally from the “uncontrolled shock” seen during the 2022 invasion of Ukraine. Cermelli suggests that the current crisis is manifesting in a way that is more subtle, faster, and potentially more dangerous because it is not driven by a physical shortage of goods. Instead, the market is effectively paying a premium for fear and uncertainty.
The volatility of the pumps and the VAT buffer
The most immediate reaction occurred in the oil markets. The price of Brent crude, the global benchmark, climbed from €70.75 on February 26 to a peak of €108.48 by March 29—a surge of more than 50% in just over a month. This volatility translated almost instantly to local gas stations across the province.
In Gipuzkoa, 95-octane gasoline rose from €1.509 per liter at the start of the conflict to €1.832 by March 21. Diesel, which is critical for the region’s extensive transport and logistics sector, saw an even sharper climb, starting at €1.469 and nearly touching the €2.00 mark by late March.
To mitigate the impact on consumers, the Spanish government implemented a reduction in Value Added Tax (VAT) for fuels, lowering the rate from 21% to 10%. This intervention provided a necessary ceiling, bringing gasoline 95 back down to €1.558 and diesel to €1.816 by the finish of the month. Despite this relief, Cermelli emphasizes that the primary concern for economists is not the absolute price level—which remains below the 2022 peaks—but the sheer velocity of the change.
| Fuel Type | Pre-Conflict (Feb 28) | Peak (March 21) | Post-VAT Cut (End of March) |
|---|---|---|---|
| Gasoline 95 | €1.509 | €1.832 | €1.558 |
| Diesel | €1.469 | ~€2.00 | €1.816 |
Natural gas: The ‘Trojan Horse’ of household budgets
While fuel prices are the most visible symptom, natural gas represents a more persistent threat to the regional economy. The European wholesale market saw prices catapult from €31.83/MWh on February 23 to €61.85/MWh by March 19, effectively doubling the cost in less than a month.
Cermelli identifies three structural dangers associated with this spike. Unlike crude oil, which often reacts in short-lived “fear peaks,” natural gas prices tend to have greater inertia, meaning increases often remain embedded in the system for longer periods. The impact on households is twofold: it raises the direct cost of heating and, because gas is a primary feedstock for electricity generation, it inevitably pushes up electricity bills.
The industrial sector in Gipuzkoa, heavily reliant on manufacturing and heavy industry, is also under pressure. With gas stabilizing in the €50-€60 range, production costs are rising. This creates a secondary inflationary loop, as companies are forced to pass these overheads onto the final price of their products, further fueling the general rise in the cost of living in Gipuzkoa.
The mortgage squeeze and the Euribor rebound
The conflict has also reverberated through the financial markets, reigniting investor fears of persistent inflation. This shift is most evident in the 12-month Euribor, the benchmark index for the vast majority of variable-rate mortgages in Spain. After a period of relative stability at 2.21% in mid-February, the index spiked to 2.93% on March 24, eventually closing the month at 2.565%—the largest monthly increase in over three and a half years.
For a typical household in Gipuzkoa with a €150,000 mortgage (25-year term with a 1% spread), the monthly payment rose from €732.32 in December 2025 to €753.51 in March 2026. Miquel Riera, an analyst at the financial comparator Helpmycash, notes that this “economic earthquake” is hitting variable-rate holders directly. Depending on whether their update is annual or semi-annual, borrowers are seeing average monthly increases between €13 and €31.
Riera also warns that the trend is extending to fixed-rate products. Banks are already increasing the cost of new fixed-rate mortgages in anticipation of further interest rate hikes from the European Central Bank. For those currently seeking financing, the advice is to close deals quickly before further rate adjustments occur.
A latent inflationary pressure
The final link in this chain is the Consumer Price Index (IPC). While Spain’s general IPC closed March at an advance rate of 3.3%, the trend in the Basque Country was already concerning before the conflict began. The region consistently faces some of the highest food costs in the country, with particular spikes in the price of beef, eggs, and fresh fruit.
Experts conclude that while the war did not create the inflationary crisis in isolation, it acted as a detonator for pressures that were already latent. The risk is that these temporary shocks grow chronic if the conflict in the Middle East persists, leading to a sustained erosion of purchasing power for local families.
Disclaimer: This article provides economic analysis based on market data and expert opinion for informational purposes only and does not constitute financial advice.
The next critical benchmark will be the release of official IPC data on April 13, which will provide the first comprehensive look at how the conflict has impacted the cost of living in the Basque region. This data will likely determine whether the government considers further interventions to shield consumers from energy volatility.
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