Higher energy prices from the Iran war combined with storms lashing the islands are weighing heavily on the state’s economic growth, University of Hawaiʻi economists said in a report released Friday.
Hawaiʻi’s real gross domestic product will likely increase by just 0.6% in 2026, down from 3.3% last year, the report from University of Hawaiʻi Economic Research Organization said.
“ Hawaiʻi is being battered by bad policy, nationally, driving up our energy prices,” said Carl Bonham, the report’s co-author. “We're being battered by storms — I mean, so many that it's starting to get hard to keep track.”
Oil prices surged after Israel and the U.S. began the war with Iran in February. Airfares spiked, making it more difficult for travelers to plan trips.
Higher fuel costs have also added to overall inflation, because it makes shipping more expensive. Honolulu’s inflation rate climbed to 4.8% this calendar year from 2.6% last year.
“The cost of energy flows through to the cost of all of the other goods we buy,” said Steven Bond-Smith, another co-author of the report.
The cost of housing also boosted inflation, the economists said. Bonham pointed to rising hurricane insurance costs as a factor here.
Overall, the surge in inflation is cutting into income gains in the islands, the report said. Inflation-adjusted income from all sources will grow just 1% in 2026.
The storms, starting with the Kona Lows in March, have damaged hundreds of homes, disrupted tourism and will require large sums in recovery spending. Gov. Josh Green said Wednesday recovery costs will top $1 billion.
Data shows visitor traffic dropped sharply after Hurricanes Lala and Lowell, Bonham said. The economists forecast Lowell, which skirted Kauaʻi earlier this month, will likely lead to a 6% decline in visitors to the island this year, the report said.
Bonham said the “parade of storms” might also cause people to avoid Hawaiʻi this fall, given the possibility more hurricanes may be coming.
“Imagine you're someone who lives on the West Coast and you were thinking, ‘Oh, well, you know, I've got some time off. Let me make a quick trip to Hawaiʻi in October or for Thanksgiving,’” Bonham said. “You might have second thoughts about it right now.”
He said there’s a “decent chance” this will make for a weak fall travel season.
