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����ӰҵERO: Hawaiʻi outlook darkens amid oil surge, rising costs

Hawaiʻi’s economy is facing a new wave of uncertainty as the war involving Iran drives up global oil prices, increasing costs for consumers, raising travel expenses and slowing growth in key visitor markets that support the state’s economy, according to the . These emerging challenges come as the state continues recovering from significant damage caused by the March Kona Low storms and ongoing sluggish labor market growth. While a recession is still considered unlikely, UHERO economists say the near-term outlook for Hawaiʻi has worsened noticeably.

The report points to modest job growth, stabilizing tourism and continued strength in construction, while warning that rising oil prices, global instability and recent severe weather events add new uncertainty to the outlook.

Major takeaways of the May 15 report:

• The war on Iran has upended what had been an improving US outlook. Federal tax cuts were poised to support consumer spending and business investment, but higher oil prices will offset much of these gains. UHERO now projects US growth of 1.7% for 2026, with inflation running at 4% for the year. Japan and other Asian oil-dependent economies face the sharpest pressures, and Canada remains weakened by trade tensions with the U.S.
• Hawaiʻi’s visitor industry entered 2026 with momentum before the March storms caused a sharp drop in passenger counts. Conditions have since weakened as jet fuel prices surged, driving up transpacific airfare and prompting some airline capacity cuts. Canadian arrivals continue to decline, while Japanese visitors face the weakest yen purchasing power in decades. UHERO projects total visitor arrivals will grow about 2% in 2026 before slowing to just 0.2% growth in 2027.
• Hawaiʻi's labor market is stable but making little incremental progress. Statewide payroll growth was essentially flat through February, and the labor force has contracted slightly. Federal employment has fallen by more than 3,000 jobs throughout the past year. Construction and health care remain the bright spots. Overall payrolls will be essentially flat this year, with tourism-linked sectors hit hardest by the oil shock. Real labor income will be unchanged as price increases outpace wage gains.
• Construction remains a genuine bright spot, with job growth ranging from more than 2% on Oahu to nearly 6% in Maui County. Large federal contracts, Maui wildfire rebuilding, and the launch of the $4 billion New Aloha Stadium Entertainment District will sustain elevated activity through the end of the decade.
• The housing market remains soft. The median single-family price has held near $1 million for seven months, but resales are slow and condominium prices continue to slip. Insurance premiums, already up 13% since the Maui wildfires, may face further increases following the March storms, exacerbating historically-poor affordability. 

Read the entire report on UHERO's website.

����ӰҵERO is housed in UH Mānoa’s .