Petrobras is scrambling to contain soaring energy costs in Brazil amid the Iran war, a move that risks triggering diesel shortages just months before crucial elections. The state-controlled oil giant is aligning with government price controls designed to curb inflation, which has surged to multi-decade highs. This strategy could force Petrobras to sell fuel below production costs, straining its finances and potentially leaving it unable to meet domestic demand.

Analysts warn the company may face diesel shortages by year-end if prices remain capped while international costs continue rising. The situation puts Brazil’s energy security in a precarious position, with Petrobras caught between political pressure to keep prices low and the reality of expensive global oil markets.