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Hawaii Businesses Face Rising Operating Costs Amidst Middle East Conflict and Oil Price Surge

·7 min read·👀 Watch

Executive Summary

Geopolitical tensions in the Middle East have triggered a significant spike in global oil prices, directly impacting Hawaii's import-reliant economy. Businesses should monitor energy costs and explore operational efficiencies as prices remain volatile.

  • Small Business Operators: Expect immediate increases in fuel and shipping costs.
  • Tourism Operators: Airline fuel surcharges may increase, potentially impacting visitor demand.
  • Agriculture & Food Producers: Higher costs for fuel, fertilizer, and transportation will strain margins.
  • Action: Monitor the Brent Crude Oil price and national average gasoline prices daily.

Watch & Prepare

High PriorityOngoing

Sustained high energy prices will erode profit margins and could necessitate price adjustments or operational changes if the conflict persists.

Monitor the daily price of Brent Crude Oil and the U.S. national average gasoline price. If Brent Crude consistently remains above $110 per barrel for more than two weeks, or if the U.S. national average gasoline price exceeds $4.50 per gallon for a sustained period, businesses should implement pre-defined cost-saving measures. This includes optimizing staffing, renegotiating supplier contracts, or implementing modest price increases. Assess the viability of hedging fuel costs if accessible and aligned with risk tolerance.

Who's Affected
Small Business OperatorsReal Estate OwnersTourism OperatorsAgriculture & Food Producers
Ripple Effects
  • →Higher fuel and shipping costs → increased cost of imported goods → reduced consumer purchasing power
  • →Elevated airfare due to fuel surcharges → decreased visitor demand → lower revenue for tourism operators
  • →Increased fertilizer and fuel costs for agriculture → higher local food prices → exacerbates inflation for consumers
Vertical shot of a gas station sign showing fuel prices, including Irving branding.
Photo by Erik Mclean

Hawaii Businesses Face Rising Operating Costs Amidst Middle East Conflict and Oil Price Surge

Recent geopolitical escalations in the Middle East, including direct strikes on energy infrastructure in Qatar and missile attacks on Saudi Arabia, have sent global oil prices surging. This rapid increase in crude oil prices, with Brent Crude already breaching $100 per barrel and expected to remain volatile, directly translates to higher operating expenses for businesses across Hawaii.

The Change

On March 18, 2026, Iran launched attacks targeting energy facilities in Qatar and Saudi Arabia, impacting significant oil and gas production and refining capabilities. This event signals a major escalation in regional conflict, directly threatening global energy supply chains. Consequently, oil prices have reacted sharply upwards. Historical data from similar geopolitical events suggests that sustained conflict in this region leads to prolonged periods of elevated energy costs. The immediate effect is a significant rise in the cost of crude oil, which directly influences gasoline, jet fuel, and shipping costs globally. Hawaii, being an island economy heavily reliant on imports, is particularly vulnerable to these price fluctuations.

Who's Affected

  • Small Business Operators (small-operator):

    • Impact: Increased operating costs due to higher fuel prices for delivery vehicles, service fleets, and utilities. Shipping costs for inventory and raw materials will rise, squeezing already thin margins. For restaurants, this means higher costs for ingredients, utilities, and delivery.
    • Timeline: Immediate impact felt within days as fuel prices adjust.

  • Tourism Operators (tourism-operator):

    • Impact: Airlines are likely to pass on increased fuel costs through higher ticket prices and fuel surcharges, potentially dampening visitor demand. Hotels and tour operators may face increased costs for transportation, electricity, and imported goods.
    • Timeline: Surging fuel costs will begin to reflect in airline pricing within one to two weeks. Visitor response will be observed over the next 1-3 months.

  • Agriculture & Food Producers (agriculture):

    • Impact: Rising costs for diesel fuel will increase expenses for farm machinery operations and irrigation pumps. The price of imported fertilizers, which are often energy-intensive to produce, will also likely increase. Shipping costs for bringing goods to market or for export will rise.
    • Timeline: Fertilizer price increases may take 2-4 weeks to fully materialize. Fuel cost increases are immediate.

  • Real Estate Owners (real-estate):

    • Impact: While not directly impacted by fuel costs, property managers of commercial spaces may see tenants (especially those in logistics or transportation-dependent sectors) facing financial strain, potentially leading to increased requests for rent deferrals or lease renegotiations. Increased energy costs could also influence tenant demand for energy-efficient buildings.
    • Timeline: Indirect impacts will be felt over the next 1-3 months as tenants adjust budgets.

Second-Order Effects

This surge in oil prices initiates a chain reaction through Hawaii's economy. Higher fuel costs for transportation and shipping will directly increase the cost of nearly all imported goods. This, in turn, will drive up the general cost of living for consumers, potentially leading to reduced discretionary spending. For small businesses, particularly those in retail and food services, this means increased overhead coupled with potentially lower consumer demand. The tourism sector could face a double whammy: higher airfares discouraging visitors and increased operational costs for hotels and tour providers. For agriculture, elevated fertilizer and fuel costs, alongside potential supply chain disruptions, could lead to higher food prices for local consumers, exacerbating inflation.

What to Do

Given the current geopolitical volatility and its immediate impact on energy markets, businesses in Hawaii should adopt a strategy of WATCH.

  • Small Business Operators: Begin contingency planning for increased fuel and shipping costs. Review operational efficiencies, such as optimizing delivery routes and considering fuel-efficient equipment upgrades where feasible. Explore opportunities for bulk purchasing of supplies to mitigate immediate shipping cost hikes. Explore potential for modest price adjustments on services and goods that are critically impacted, but monitor competitor pricing closely.

  • Tourism Operators: Monitor airline pricing trends and fuel surcharge announcements closely. Communicate any potential impacts on package deals or tour costs proactively to customers. Evaluate energy consumption within properties and explore short-term savings where possible, such as adjusting HVAC settings or promoting off-peak services.

  • Agriculture & Food Producers: Begin seeking alternative suppliers for fertilizers and other imported inputs to hedge against potential price gouging or prolonged supply disruptions. Assess the feasibility of adjusting crop mixes towards less energy-intensive production or those with higher local demand resilience. Explore opportunities to lock in fuel prices for essential machinery operations if forward contracts become available and financially viable.

  • Real Estate Owners: Engage proactively with commercial tenants to understand their operational challenges related to rising energy and shipping costs. Highlight any energy-efficient features of your properties and consider offering incentives for tenants to adopt energy-saving measures.

Action Details: Monitor the daily price of Brent Crude Oil and the U.S. national average gasoline price. If Brent Crude consistently remains above $110 per barrel for more than two weeks, or if the U.S. national average gasoline price exceeds $4.50 per gallon for a sustained period, businesses should implement pre-defined cost-saving measures, such as optimizing staffing schedules during slower periods, renegotiating supplier contracts, or implementing modest price increases on goods and services. Businesses should also assess the viability of hedging fuel costs if such financial instruments become accessible and align with their risk tolerance.

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