Israel cuts fuel tax as gasoline prices hit record high

Israel’s Finance Minister Bezalel Smotrich signed an order on Sunday to reduce the country’s fuel excise tax for two months following a rise in gasoline costs linked to the U.S. conflict with Iran.

The country’s Energy Ministry adjusts gasoline prices at the beginning of each month. On September 1, petrol prices increased by 0.16 shekel per liter to 8.25 shekels ($2.74) per liter, reaching an all-time high. At $10.41 per gallon, Israel’s gasoline ranks among the most expensive globally.

The fuel excise tax, known as the "blu" tax, makes up 44% of the price and stood at 3.66 shekels per liter at the start of the month. Value added taxes account for 15% of the cost, while global oil prices represent 33%.

Smotrich ordered a 0.5 shekel per liter reduction in the tax, which will lower gasoline prices to 7.75 shekels per liter starting midnight on Monday.

Brent crude futures closed at $96.28 per barrel on Friday, marking their highest level since July 24, as Middle East tensions raised global supply concerns. Israel has not participated in recent fighting since an April ceasefire agreement.

Last week, the Bank of Israel lowered its benchmark interest rate by 25 basis points for the third consecutive decision due to low and stable inflation. Smotrich stated at that time that additional easing was necessary.