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No IDP is required. If you use a travel credit card and rent a car with it, it will probably cover any damage. If you go that route the rental card company will probably pre authorize your credit card for $1200-$1800. Also be aware if there is any damage you will need to pay and then be reimbursed by your credit card company. Some travel insurance will also cover your car rental. Final option is to get insurance from rental car company. Also request a toll tag. Car rentals are relatively inexpensive. Small economy $7-$8/day.

Full driving license covering the type of vehicle you hire (plus passport in same name), car insurance is part of the hire.  As above hire company put a "hold" 1000ish euro on your normal credit card (some don't take American Express) against damage/flat tyre, key loss etc. Make sure your card limit will cover this, a second card is sometimes helpful if for somereason the first one is not accepted.  You can get short term insurance on line covering the 1000ish euro but you still have to pay then reclaim, hire company also try and sell you additional insurance covering this. Assuming you are flying to Lisbon or Porto, both airports have a load of car hire companies, Porto if prebooked they send a minibus to collect you, Lisbon most are in the terminal (all flights arrive Terminal 1).  Use a site like Argus (internet search) which does the search of many companies for you, prices vary a lot depending on time of year, print off the hire details just in case.   Most cars are manual. Full to full fuel policy is best and both airports have a fuel station half a kilometer way. A SatNav is very useful or a mobile which does the same. Big roads have tolls so make sure the hire place has activated the green transponder in the car then every time you go under an auto-toll or Via Verde lane it'll beep and take a fee from your credit card.