The latest figures from the Economics and Statistics Office show that 2025 inflation came in at 1.2%. Yet with the Iran War energy price shock already impacting prices in Cayman analysts expect inflation to rise in 2026.
The data release from ESO showed that the consumer price index increased by 1.3% in the fourth quarter of 2025, compared to the third quarter of 2025. Cayman’s Consumer Price Index was 1.2% higher in December 2025 than it was in December 2024.
Those figures might seem low to many residents in the Cayman Islands, where cost-of-living is a hot topic. “Different people have very different spending patterns,” said local economist Julian Morris. “If people feel the inflation number does not reflect their experience, it is likely because their personal spending differs from the official basket.”
One factor for the relatively low inflation number was the falling price of energy in the fourth quarter of 2025. ESO’s numbers showed that in the fourth quarter of 2025, electricity prices fell by 2% and gasoline fell by 0.6% compared to the same period the year before. Yet with the Iran War pushing up energy prices, that trend seems likely to reverse in 2026.
Global energy shock
In response to US and Israeli attacks, Iran has struck regional energy infrastructure and closed the Strait of Hormuz, a key global waterway for the shipment of oil and gas. As a result, global energy prices have rocketed. Cayman doesn’t use much natural gas, but it is heavily dependent on crude oil derivatives for transportation and the generation of electricity.
The oil dependency is exacerbated by the small proportion of renewable energy – it accounts for less than 3% of power generation – which means the islands still generate the majority of electricity from diesel.
The most relevant global benchmark for energy prices in Cayman is West Texas Intermediate (WTI) crude, which stood at $91.90 per barrel at midday on 24 March, up almost 60% from $57.95 per barrel at the start of the year.
“You can actually predict the pump price in Cayman very accurately using just WTI,” said Dow Travers, CEO of Refuel. “Changes in WTI account for about 79% of the changes in pump price in Cayman. For every US$1 change in WTI there is roughly a 3.5 [cent] change in Cayman.”
Prices at the pump have already increased in Cayman. According to 24 March data from the Utility Regulation and Competition Office, which monitors fuel prices, the average price of regular gasoline in Cayman increased to $5.28 per gallon, from $5.02 per gallon on 17 March.
Beyond gasoline
Electricity prices respond more slowly to increasing fuel costs. “The costs that CUC incurs typically lag behind market prices due to shipping timelines and CUC storing some fuel on site,” said CUC VP of Energy Operations, Stephen Jay.
“Changes in market prices may take as much as three to four months to impact customers’ bills,” said Jay. “CUC does not profit on fuel; the cost is a pass through with no markup.”
There is more pain to come for consumers in Cayman. “Higher fuel prices increase shipping costs, refrigeration costs and transport costs,” said Morris. “That will push up food prices, particularly for refrigerated goods and fresh produce.”
And even though natural gas makes up a relatively small proportion of Cayman’s overall energy matrix, those living on the islands will still be impacted by the commodity’s sharp price increase. “Natural gas is a key input into fertiliser production,” said Morris. “If supply is disrupted, fertiliser prices will rise, which would push up agricultural costs. That would lead to higher grain prices and, in turn, higher meat prices, because livestock production depends heavily on grain.”
ESO estimates that inflation in Cayman will hit 2.6% in 2026. Yet the eventual pace of increase will ultimately be decided by events far from these islands.
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