Sweden proposes to cut fuel tax and reduce Iran war price impact

Households will also be compensated for higher electricity and gas prices in January and February. Read more at straitstimes.com.

STOCKHOLM – Sweden’s government said it will temporarily cut the duty on vehicle fuels to reduce the inflationary impact of the Iran war on voters six months ahead of a general election. 

Sweden will lower the tax on petrol by 1 krona (S$0.13) per litre and on diesel by 0.4 krona per litre between May 1 and Sept 30 at a cost of 1.64 billion kronor, Prime Minister Ulf Kristersson said at a news conference in Stockholm on March 23. 

The government said it would also compensate households for higher electricity and gas prices in January and February at a total cost of 3.4 billion kronor to allow households to “better meet higher energy prices”.

“In difficult times, we will always prioritise the budgets of hard working families,” Mr Kristersson said. 

Sweden’s economy is bouncing back from three years of near stagnation helped by lower interest rates and a more expansive fiscal budget for 2026. But an Iran-war-related spike in energy prices risks derailing the recovery just as the government prepares to launch its reelection campaign ahead of the September vote.  

The government is currently trailing the opposition bloc by around 6 points, according to opinion polls.