Small islands are particularly susceptible to seawater intrusion, a problem intensified by climate change factors such as sea-level rise, prolonged droughts, and increased frequency of storm surges. These threats compromise their limited freshwater resources, making advanced variable-density numerical models essential tools for managing vulnerable aquifers. This study presents a fully coupled 3D variable-density flow and transport model developed with COMSOL Multiphysics for groundwater management on Laura Island, Majuro Atoll in the Marshall Islands. The model incorporates the island's geometry and geology, including the innovative implementation of cross-shaped horizontal wells. These wells provide a more efficient and sustainable alternative for groundwater extraction in thin aquifers, reducing the risk of seawater intrusion compared to traditional vertical wells. The model was calibrated to reproduce the historical freshwater lens response (2007–2022) under variations in recharge, sea level, and pumping. Future climate scenarios were simulated to assess three key threats: (i) prolonged drought, (ii) sea-level rise, and (iii) rapid flooding from storm surges. Each scenario evaluated changes in freshwater lens volume and recovery time. An additional innovation is the incorporation of submarine groundwater discharge (SGD), a critical process in island hydrology influencing both water quantity and quality. By accounting for SGD, the model improves predictions of freshwater lens behavior under different climatic and human-induced stressors. The model also captures the unique dynamics of storm surges, where seawater temporarily overlays the freshwater lens before rebalancing. This feature enhances understanding of how rapid flooding impacts groundwater availability and quality. Overall, Laura Island has limited freshwater reserves, fluctuating around 2 hm³. These reserves are highly sensitive to extreme conditions, responding rapidly to external stressors such as droughts or flooding. However, they also exhibit a fast recovery capacity, providing resilience against environmental changes.