Reports Tuesday, May 12, 2026, indicated that President Trump is preparing to meet with his national security team to weigh a potential return to military operations against Iran, alongside renewed discussions about restarting commercial vessel escorts through the Strait of Hormuz. The escalation in posture follows Trump’s Sunday rejection of Iran’s counterproposal as “TOTALLY UNACCEPTABLE” and his Monday characterization of the ceasefire as “on massive life support… 1% chance of living.”
A restart of vessel escorts would mark an explicit operational signal that the diplomatic track has run out. The original Project Freedom initiative, launched in early May, was paused on Tuesday May 5 to give space for the 14-point memorandum talks. The pause held until Friday, when U.S. forces disabled two Iranian tankers attempting to evade the blockade in what President Trump characterized as a “love tap.” Restarting full escorts would shift U.S. activity from enforcement on the margins back to scheduled convoy operations through the strait — a posture closer to active wartime operations than to a ceasefire.
Markets read the signals clearly. WTI June futures advanced 4.2% Tuesday to settle at $102.18 per barrel; Brent July futures gained 3.4% to $107.77. Both benchmarks are now up more than 45% since the U.S.-Israeli war against Iran began February 28. Implied volatility climbed across the curve. Kalshi traders moved odds of WTI reaching $127 at some point in 2026 above 70%. Citi wrote in a note Tuesday: “Oil prices have been volatile and can rise further if US-Iran dealmaking remains thorny.”
The military-posture review comes as Trump prepares to travel to Beijing later this week for talks with President Xi Jinping. According to Henry Wilkinson, chief intelligence officer at geopolitical risk firm Dragonfly, Trump may use the Xi meeting to press China to lean on Iran to accept U.S. terms. China has called repeatedly for the Strait of Hormuz to reopen given how much of its energy supply transits the waterway. A diplomatic breakthrough this week is unlikely, however, with the Trump-Xi summit serving more as a forcing function for the next phase of the negotiation than as a venue for an actual deal.
Iran’s position has hardened. Iranian state media continues to frame Tehran’s counterproposal as a rejection of what it characterizes as a U.S. demand for “surrender.” Iranian Army spokesperson Brig. Gen. Mohammad Akraminia has warned of “surprising options” if adversaries made another “miscalculation.” The Iranian counter demanded a 30-day suspension of OFAC sanctions on Iranian oil sales and an end to the naval blockade — conditions the U.S. has consistently rejected as unacceptable preconditions to substantive nuclear concessions.
Amos Hochstein, former senior energy advisor to President Biden, captured the mood on CNBC’s “Squawk Box” Tuesday: “We’re in a stalemate, a frozen conflict. In the meantime, the straits are closed so we’re in a no war, no oil, no straits condition.” Hochstein said oil is likely to remain in a $90-100 range through the rest of 2026 and into 2027 even if Hormuz reopens in early June — an indication that even producers and former officials see no quick path back to pre-conflict normalcy.
The combination of a hardening military posture and the looming Beijing summit creates a narrow window. If Trump’s national security team converges on a recommendation to restart Project Freedom and authorize tighter enforcement before he departs for China, the market will price further escalation. If the team holds off pending the Xi meeting, the next 72 hours will be quieter, but the underlying stalemate persists. Either path produces structurally higher crude. For continuing coverage, see our geopolitics dashboard and Strait of Hormuz explainer.