Iran cluster — May 14, 2026.

The summit happened. Iran ignored it.
A ship was boarded 38 miles off Fujairah this morning. Iranian boats. Heading back to Iranian waters. A few hours later a South Korean cargo ship was hit further into the strait. Seoul's official line: "we rule out any party other than Iran."
This is happening while Trump sits across from Xi at the Great Hall of the People.
THE SUMMIT — WHAT EVERYONE GOT WRONG
Before the meeting, the bet on Polymarket was simple: China leans on Iran, the strait reopens. Xi is Iran's biggest oil buyer. Pull the spigot, things settle. That was the trade.
The readout came out this morning. Per the White House, Trump and Xi agreed on three things:
1. The Strait of Hormuz must stay open.
2. Iran can never have a nuclear weapon.
3. China will buy more American oil.
Wang Yi and Rubio added their own line: no country can charge tolls in international waters. A direct shot at Iran's new transit-fee regime.
China sided publicly with the US. Iran answered with ship seizures in the same news cycle.
The market hasn't fully digested this yet. Peace YES on June 30 is still around $0.30. The story that just printed kills the path to it. China's leverage was the only realistic mediation lever inside the summer. Pakistan-as-mediator is a slower track. Direct US-Iran talks are stuck. There's no third option that fits in the next 60 days.
THE PARALLEL TRACK — "OPERATION SLEDGEHAMMER"
NBC ran the Pentagon story while the summit was live. The working name for the next phase of the Iran war, if the ceasefire collapses, is "Operation Sledgehammer." The point of the rename is to reset the 60-day War Powers clock from zero. Trump can run another bombing campaign without going back to Congress.
Translation: the kinetic option is getting dusted off, paperwork pre-staged.
Three things to watch:
- Project Freedom *ordered* — not leaked, ordered.
- A commercial ship hit hard enough to make front pages.
- Iran formally walking away from talks.
None of those have fired yet. When they do, market moves won't be 5 points. They'll be 15-20.
THE FED CORNER
Bloomberg this morning: the Senate narrowly confirmed Kevin Warsh as Fed Chair. PPI came in at 6% year-over-year — fastest pace since 2022, driven by war-energy feeding through freight costs. 10-year Treasuries hit the highest yield since July. Traders are now pricing rate *hikes* next year, not cuts.
THE FRAME
China was the lever. The lever got pulled — in the other direction.
Iran responded with attacks. The Pentagon sharpened the kinetic option. Powell hands the Fed to a man the bond market reads as more hawkish, into the hottest PPI in four years.
Day 77.