High tariffs, reduced immigration, and the Iran war's disruption on fuel is creating uncertain times for Hawaiʻi's economy, according to the University of Hawaiʻi Economic Research Organization’s second quarter report.
The analysis, titled “War brings more stormy weather to Hawaiʻi,” states that although a recession remains unlikely, the near-term economic forecast has “materially worsened.”
Carl Bonham, the executive director at UHERO, said the biggest takeaway for the average Hawaiʻi family is to expect “just about everything” to cost more.
“These costs go up, and yes, eventually energy prices will come down, and as prices will come down, but some of the elevated prices will remain for longer periods of time,” Bonham said. “So this is kind of going to be a period of belt tightening for the average household.”
Researchers believe the average household is paying $100 extra a month in energy expenses because of inflation and higher gas prices.
The report stated inflation is set to peak around 4.8%, which stands at about 1.4 percentage points higher than the first quarter forecast. In comparison, 2025 saw a rate that stood just below 3%.
The UHERO team predicts the inflation rate will continue to be above normal trends until 2028.
The number of visitors coming to Hawaiʻi took a hit with the Kona low storms in March, and those numbers have stayed lower than usual because high jet fuel prices have made flying more expensive.
“The visitor industry entered 2026 with some momentum, before the March storms caused a sharp drop in passenger counts,” the report states. “Underlying conditions are now deteriorating. Jet fuel prices have roughly doubled, pushing transpacific fares up 20–25% and prompting some airline capacity cuts.”
The report describes the housing market as soft and the labor market as stable, but states construction and healthcare remain “bright spots” for Hawaiʻi’s economy.
