The tragic and shocking news from Norway in the last days has brought the name of this formerly insignificant island in a lake not far from Oslo to the world’s attention.
The name means “the outer island”, illustrating the Scandinavian feature of placing the definite article, in this case feminine, after the noun as a suffix. It also has the typical Scandinavian (Norwegian and Danish, but not Swedish or Icelandic) letter <ø> which represents a front rounded vowel. The British media are mostly replacing it with <oe>, treating it (quite reasonably) in the same way that they would the German (and Swedish and Icelandic) <ö>, or ‘o umlaut’.
The pronunciation in Norwegian is [ˈʉtœya]. The [œ] is rather different from the French vowel represented by the same IPA character, the French vowel having ‘close’ rounding, while the Norwegian one has ‘open’ rounding – the lips are much further apart.
This is obviously causing problems to English-language broadcasters, not surprisingly, but the nearest one could come would be something like /ˈuːtˌəjə/.
The word “utøy” (without the definite article) is ambiguous – splitting it into ‘u’ and ‘tøy’, it means “vermin”, and the pronunciation is distinguished by the /t/ being strongly aspirated in “vermin”: [ˈʉtʰœy], but not in “outer island”. “Vermin” is also neuter, and so in the definite form is ‘utøyet’ rather than ‘utøya’.