Hoey sprinted into an early share of the lead with a sixth birdie in eight holes mid-round before eventually signing for a four-under-par 67 on the Club de Campo Mediterranean course.
England’s Ross McGowan again showed his fondness for Spain, recording a seven-under-par 64.
Paraguay’s Fabrizio Zanotti and England’s Richard McEvoy share second place at five under par, with Hoey among seven players one shot back.
Hoey bogeyed the 16th but then doubled the par-four 17th, where his tee shot came to rest on a mound and in playing his second he brushed the side of his leg on his downswing.
“I was playing really good to be six under par through 15 holes after birding that hole but after getting most of the hard work done, I hit a great drive down 17 but the wind died,” he said.
“So I slightly turned it over with the ball landing on a bank, but then in playing my second shot, I caught my knee with my swing on the way down as the stance was just so awkward.
“I got a bit unlucky but that’s golf because I had got some good breaks early on, and to get to six under par it felt relatively easy.”
However, Hoey composed himself to hole a 45-footer at the last for birdie and an excellent round of 67.
“This golf course can seem easy but if you are slightly out of position, it can jump up and bite you very quickly,” Hoey declared.
“I am just swinging it well and enjoying my golf.”
After spending three weeks at home, Hoey was itching to return to competition ahead of a number of lucrative events, including next fortnight’s HSBC Champions event in Shanghai, and his World Golf Championship debut.
“I’ve just had three weeks at home since my win in the Dunhill and I was feeling a bit bored, so I was looking forward to getting back into competition,” he said.
“The celebration was a bit low key apart from about three to four pints of Guinness on the Sunday night after my win.
“But I was tired and happy to get to bed that night because it had been a long week.
“So it’s nice to get back into competition.”
Damien McGrane is next best of the Irish in carding a 69 while good friend Peter Lawrie struggled with a 73.
Ballyclare’s Gareth Maybin was two under par early on before signing for a 72 and Shane Lowry suffered a horror 78 that included four bogeys and back-to-back double bogeys.
Meanwhile, Javier Ballesteros, the son of the late, great Seve, has been offered an invitation to contest next year’s Majorca Open on the first anniversary of his father’s death.
The 21-year old Ballesteros is still studying for a law degree but has found time in recent weeks to compete in two Race to Dubai Pro-Ams.
Ballesteros, who plays off a handicap of one, competed alongside world number one Luke Donald at the recent Madrid Masters.
He then teamed with defending Castellon Masters champion Matteo Manassero in this week’s Pro-Am ahead of the Sergio Garcia-hosted event.
“It is great to receive an invitation to play next year’s Majorca Open and it will be the first time I have played on the European Tour,” he said.
“But I will not be turning professional until after I finish my law degree so hopefully if there are any other amateurs playing in the Majorca Open, I can be the leading amateur.”
Ballesteros, who turned 21 last August, indicates he practices hard at the Golf Santander complex in Madrid built by his grandfather, Emilio Botin.
“I am hitting about 200 balls a day at Golf Santander but only managing to play about one game a week,” said Ballesteros.