Three-time champion Jon Rahm was three shots back on Thursday despite being a late arrival to the tournament following the birth of his third child.
Hidalgo finished with consecutive bogeys but shot a career-best 30 in the front nine with four birdies and an eagle at the Club de Campo Villa de Madrid.
The 26-year-old Spaniard had six birdies in total and was two shots ahead of Sepp Straka, Julien Guerrier and Sam Bairstow.
Rahm was in a tie for fifth after finishing with two consecutive birdies in his 68. He also had three other birdies and two bogeys.
Rahm only arrived in the Spanish capital on Wednesday after the birth of his first daughter.
He had also struggled with flu symptoms that kept him from playing in the LIV Golf Team Championship last week.
Rahm won the LIV individual title and was back in Europe to try to reach the minimum of four European tour starts required to be considered for the Ryder Cup next year.
He is being allowed to play after appealing the European tour sanctions against him for playing on the Saudi-based circuit.
Rahm is trying to become the first four-time winner in the 52-year history of the Spanish Open, having won in 2018, 2019 and 2022.
"Just flying in yesterday afternoon and not having touched a glove in a while, and between being sick and the hospital bed, if I can somehow break 75, I'll be happy and then see if I can work myself into the tournament," said Rahm, who was making his first European tour start since he joined LIV Golf last December.
"I kept putting it in play for the most part and giving myself good looks, made a few really good par putts on on sixth and on 11 that kind of saved the round, and with a great finish I find myself with a great score that is rather, I would say, unexpected."
Strong winds made it tough on players all day long at the Club de Campo.
Tyrrell Hatton, another player who defected to LIV and was going through the same appeal process as Rahm, shot a three-over 74 after five bogeys and two birdies on his first nine holes.
Patrick Reed, another LIV player, was in a tie for 28th after a par 71.
Tommy Fleetwood (69) made three birdies on his last six holes and was in a tie for eighth. He had two bogeys in his round.
David Micheluzzi was the leading Australian with his level-par 71, which featured three birdies and three bogeys, in joint-29th place. Jason Scrivener recorded a three-over 74, Haydn Barron a 75 and Andrew Martin a 77.
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