Despite a recent spike in South China Sea incidents involving water cannons, close aircraft approaches, and vessel harassment during resupply missions to Second Thomas Shoal and other features, traders assign a 72.5% implied probability against a full military clash before 2027. Both Beijing and Manila have relied primarily on coast guard and maritime militia assets rather than naval or air force escalation, while continuing diplomatic protests and envoy summons. Philippine officials have described the situation as one of managed friction, with President Marcos noting the need to avoid missteps that could spiral out of control. Sustained U.S. security cooperation and mutual interest in preventing open conflict reinforce the current pricing, as low-level gray-zone pressure has not translated into kinetic military engagement in the short window through year-end 2026.