Hawaiʻi outlook darkens amid oil surge, rising costs

from UH News May 15, 2026

Kona Low storms, rising oil prices and global conflict are creating new economic uncertainty for Hawaiʻi, according to a new forecast from the University of Hawaiʻi Economic Research Organization (UHERO). The pressures are expected to push Hawaiʻi inflation higher and weigh on visitor arrivals and spending.

The UHERO second quarter forecast released May 15 indicates Hawaiʻi’s economy is slowing after what had been an improving outlook earlier this year. The war involving Iran has driven up global oil prices, increasing fuel and travel costs while weakening some of the international economies that help power Hawaiʻi tourism.

At the same time, Hawaiʻi is still recovering from damaging March Kona Low storms that caused flooding and infrastructure damage.

“Hawaiʻi’s economy is facing a new wave of uncertainty,” UHERO economists wrote in the report.

Tourism entered 2026 with momentum before the storms caused a sharp drop in passenger counts. According to UHERO, conditions have since weakened as jet fuel prices surged, driving up airfare and contributing to airline capacity cuts. Canadian arrivals continue to decline, while Japanese travelers face the weakest yen purchasing power in decades.

UHERO projects visitor arrivals will grow about 2% this year before slowing sharply in 2027.

The labor market is also showing signs of strain. Payroll growth has been mostly flat, and federal employment has dropped by more than 3,000 jobs throughout the past year. Construction and healthcare remain bright spots, supported by major projects including recovery and rebuilding efforts on Maui following the 2023 wildfires and the New Aloha Stadium Entertainment District.

Housing affordability also remains a challenge. Median single-family home prices have hovered near $1 million, while insurance premiums continue rising following the Maui wildfires and recent storms.

Read the entire report on UHERO’s website.

UHERO is housed in UH Mānoa’s College of Social Sciences.

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