The escalation of conflicts in the Middle East has already raised a warning signal for the entire Brazilian economy and, in particular, for industry. This is because the increase in natural gas and electricity prices could have a knock-on effect on production costs if the war lasts longer than expected, according to an assessment made by the Infrastructure Council of the National Industry Confederation (Coinfra/CNI).
The concern is directly linked to the dynamics of global energy markets. With the involvement of the United States, Israel and Iran and the closure of the Hormuz Canal, one of the main oil and gas transport routes in the world, international prices have already begun to react. A barrel of Brent oil reached the level of US$100, while the JKM index, a reference for liquefied natural gas (LNG) in Asia, increased by around 50%.
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This movement, according to the entity, will not be restricted to the external scenario. In Brazil, a relevant portion of natural gas contracts used by the industry is indexed to Brent, while the fuel destined for thermoelectric plants follows the JKM. “As these contracts are usually readjusted every three months, based on the average of the last 90 days, the tendency is for the recent increase to be gradually passed on to internal costs, especially if the conflict persists”, informed the CNI in a note.
In practice, this means direct pressure on strategic production chains. Natural gas is a fundamental input for the production of fertilizers, which can increase costs in agribusiness. It is also widely used by energy-intensive industrial sectors, such as chemistry, steel, petrochemicals, ceramics and glass, increasing the risk of a general increase in prices, according to the assessment.
Furthermore, there is a potential impact on the electricity sector. Brazil currently has 178 natural gas thermoelectric plants, which total around 19 thousand MW of installed capacity, equivalent to 60% of thermal generation and approximately 9% of the total electrical matrix. “As fuel becomes more expensive, energy production tends to become more expensive, which may be reflected in tariffs.”
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The CNI also draws attention to more structural effects. Volatility in the international LNG market increases the perception of risk in projects that have not yet been contracted, especially those that depend on the fuel to be viable in auctions such as the Capacity Reserve (LRCAP). This could affect investment decisions and the expansion of energy supply in the country, in the opinion of the industry.
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The scenario is particularly sensitive because Brazil already faces a high cost of natural gas in international comparison. In Coinfra’s assessment, the additional increase caused by the conflict could further worsen the loss of competitiveness of the national industry.
Another point of attention is in the short term. Several natural gas supply contracts must be readjusted from May 1, 2026. If the war continues to put pressure on international prices until then, the recomposition of these contracts tends to incorporate the recent increase, intensifying the impact on industrial costs.
Given this situation, the entity defends the adoption of measures to mitigate the effects of price escalation. “It is time to discuss measures to minimize the possible increase in these inputs, in order to protect consumers and the Brazilian economy, ensuring the maintenance of the industry’s competitiveness”, stated the president of Coinfra/CNI, Alex Dias Carvalho.
Ultimately, a geopolitical conflict, even if distant, can quickly cross oceans and reach the energy bill, industrial production and, at the end of the chain, the pocket of the Brazilian consumer, says the CNI.
