Heightened maritime incidents between Chinese coast guard and maritime militia vessels and Philippine forces in the South China Sea have driven recent tensions, including close aerial intercepts, water cannon use during resupply and medical missions, and a near-doubling of tracked Chinese vessels in disputed areas through September 2026. Both governments have responded through diplomatic protests, envoy summons, and public statements reaffirming preferences for dialogue and restraint, while avoiding direct armed clashes between naval or air forces. Suspended military hotlines and stalled Code of Conduct negotiations have not altered this pattern of managed grey-zone confrontations. Traders assign an 80% implied probability to no full military clash before 2027, reflecting the absence of escalation triggers despite ongoing enforcement activities around Scarborough Shoal and Second Thomas Shoal.