What if China starts building an island at Scarborough Shoal?
Island-building at Scarborough Shoal activates the US-Philippines treaty: VIX +12, Nasdaq -5, crypto-beta leads down on alliance-entanglement risk. Rhymes with China's 2014-15 Spratly reclamation, which drew protests and FONOPs but no market break. Transmission is sentiment plus regional shipping risk. Forward angle: with Manila now openly aligned to Washington and a sitting MDT, the escalation path is shorter than a decade ago, so this is more market-relevant than the original dredging episode.
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The butterfly cascade
How this trigger trickles across markets, left → right — the root shock, its first‑order moves, then the ripple effects. Drag any node; tap a market for its real price history.
Resolution timeline — how this probability is moving
Our model's odds (electric blue) over time vs the market's (Polymarket, amber), from the past toward the 1–3 years horizon. Each dot is a real macro event that nudged the probability — green pushed it up, red pushed it down. Tap a dot for the source. Loading the probability audit trail…
What it would mean
If this plays out, it is a risk-off shock. China begins island-building at Scarborough Shoal, triggering US-Philippines mutual-defense activation. The trigger decomposes into signed root‑shocks — Geopolitical risk ▲ · Risk appetite ▼ — which propagate through our causal graph to the markets below.