Day 67. The re-escalation scenario I'd been carrying at the top of the distribution hit. This is the entry where I show the work on a call that landed, and then immediately complicate it, because a call landing doesn't mean the model is good — it means one branch resolved.
What happened in 36 hours
The April 8 ceasefire collapsed when Israel launched "Operation Eternal Darkness" in Lebanon — 357 dead in a single day. Iran went back to blockading Hormuz. Trump announced "Project Freedom": U.S. Navy escorts to force ships through the strait, launching Monday.
Within hours of launch:
- U.S. and Iranian forces traded fire. The U.S. sank six or seven small Iranian boats. Iran's Fars claimed missile hits on a U.S. warship; CENTCOM denied it.
- Iran struck the UAE for the first time since the April 8 ceasefire — 12 ballistic missiles, 3 cruise missiles, 4 drones. One drone hit the VTTI oil terminal at Fujairah and set it on fire.
- A South Korean cargo ship was hit in the strait. A residential building in Oman was struck. UAE schools went remote.
- Trump, on Fox: Iran will be "blown off the face of the earth" if it targets U.S. ships.
- Day 1 traffic under the escort regime: two U.S.-flagged vessels transited. The pre-war baseline was ~120 a day. CENTCOM called it a "tactical success." Shipping CEOs and independent analysts said commercial confidence was unchanged — most ships will keep avoiding the strait regardless of escorts.
The move everyone under-reported
The Fujairah strike. Fujairah is the terminus of the UAE pipeline built specifically to bypass Hormuz — the one route that lets oil leave the region without entering the strait at all. Iran hit the bypass.
The message is unambiguous: there is no end-run. If Iran can't control the strait, no one transits the alternative either. The corporate wires filed this as "drone hits oil terminal," which undersells it by an order of magnitude. It wasn't a terminal story. It was Iran closing the last loophole in its own blockade.
Grading the call
Back in late April I put re-escalation at ~45% and the within-week-resolution case at ~30%. Project Freedom resolved that branch hard. The de-escalation path is now functionally closed; the question is no longer whether it stays hot but whether it stays at low-grade attrition or breaks into a second full hot phase.
Revised weights:
| Scenario | Late April | Now |
|---|---|---|
| Hormuz reopens within a week | ~30% | ~10% |
| Sustained low-grade attrition / grind | ~35% | ~50% |
| Major escalation / US strikes Iran directly again | (inside re-escalation) | ~30–35% |
| Ceasefire collapse with multi-front expansion | — | ~5–10% |
The downstream numbers
This is the part that actually hits my household, so I track it closely.
- Chicago gas: was tracking ~$4.45 sustained; revising to $4.75–5.25 by end of May, $5–5.75 by mid-June. Some Chicago stations already at $5.10. Eurasia Group's $5 national call by June is consistent.
- Household impact: revised from ~$900–1,400/mo to ~$1,100–1,700/mo sustained through Q3.
- Casualties of the grind: Spirit Airlines ceased operations on May 2, citing fuel costs. Goldman estimates global production down ~14.5M bpd.
I'll also note the thing I said earlier that's holding up: independent reporting kept its lead on this turn too. The independent outlets were reading Iran as escalating while the wires were still framing Project Freedom as a path to reopening. The wires were 48–72 hours behind reality again.
What I'm watching
- Whether attrition holds at ~50% or the ~30% direct-strike branch opens.
- The mine problem — still the physical reason a clean reopening can't happen on a diplomatic timeline.
- Coalition behavior. Trump's request to NATO, China, Japan, and South Korea was declined; the UK and France said they'd join a defensive mission only after a sustainable ceasefire. That's everyone declining to co-sign the escort strategy.
Part 4 of a running series. The next entry is the uncomfortable one — a full scorecard, including the calls I got wrong.