Israel slashes fuel excise duty for two months as petrol hits record high

Israel's Finance Minister Bezalel Smotrich has signed an emergency order to reduce the country's fuel excise tax for the next two months, responding to a sharp spike in gasoline prices driven by escalating US-Iran tensions.

The move comes after petrol prices in Israel touched an all-time high of 8.25 shekels ($2.74) per litre on September 1, a rise of 0.16 shekel from the previous month. At roughly $10.41 per gallon, Israeli motorists now pay some of the highest fuel prices in the world.

The tax cut, amounting to 0.5 shekel per litre, will bring the price down to 7.75 shekels per litre from midnight Monday. The excise duty—locally known as the 'blu' tax—currently accounts for about 44% of the pump price, while value-added taxes make up another 15% and global oil prices the remaining 33%.

The decision follows a period of volatility in international crude markets. Brent futures closed at $96.28 a barrel on Friday, their highest level since late July, as Middle East supply concerns mount. Israel has not been directly involved in the latest round of fighting since an April ceasefire.

The fuel price relief comes alongside recent monetary easing by the Bank of Israel, which cut its benchmark interest rate by 25 basis points for a third consecutive meeting last week, citing low and stable inflation. Smotrich had earlier called for further monetary easing, and Deputy Governor Andrew Abir has indicated that additional reductions remain possible if price pressures stay contained.