Market Pulse with Dan Sheehan

Good Morning Investors,

Missiles over Tehran changed everything overnight. Israel's preemptive strike on Iranian nuclear facilities has oil spiking 13%, futures crashing, and the VIX climbing as geopolitical risk returns with a vengeance. What started as a quiet drift toward all-time highs just became a test of market resilience.

Iran's government called it a "declaration of war" and vowed immediate retaliation, with drones already reportedly launched toward Israeli targets. The strike reportedly killed top IRGC officials and nuclear scientists, marking the most serious escalation in months. This isn't just another headline, it's the kind of shock that separates conviction from complacency.

Opening Bell

Futures are sharply lower. The Dow is down over 1%, the S&P 500 off 1%, and the Nasdaq 100 sliding 1.3%. Crude oil jumped as much as 13% in early trade, while gold broke to fresh one-month highs. The dollar rallied as investors retreated into defensive assets, with crypto and tech stocks hit hardest.

This is classic risk-off rotation: Oil up, yields volatile, VIX climbing. Bitcoin slipped below $103,000 overnight while Ethereum fell over 7%, echoing broader stress across risk assets. The shift is reactionary, but so far, not panicked.

Market Framework: War Talk, Rate Talk, and a Reality Check

Israel’s “preemptive strike” on Iranian military and nuclear facilities, reportedly killing top IRGC officials and nuclear scientists, marks a major escalation. Iran’s government called it a “declaration of war” and vowed retaliation. Drones have reportedly already been launched toward Israeli targets, with U.S. assets in the region now under explicit threat.

President Trump posted a warning to Iran: “Make a deal before it’s too late.” Meanwhile, Secretary Rubio emphasized the U.S. had “no involvement” in the strike, a strategic signal meant to avoid immediate escalation involving American forces.

Markets had just begun to find their footing on softer inflation data and easing tariff uncertainty. But now, oil-driven inflation risk is back on the table, and any hopes of aggressive Fed easing next week may have to contend with rising geopolitical risk premiums.

Corporate Framework: AI Arms Race Goes Nuclear (Metaphorically)

Meta dropped $14.3 billion for a 49% stake in Scale AI, valuing the data-labelling company at $29 billion. Even more significantly, 28-year-old Scale founder Alexandr Wang will join Meta’s internal “superintelligence” program, a signal that Zuckerberg isn’t just buying tools, he’s buying leadership.

AMD made headlines of its own at the “Advancing AI” event in San Jose, unveiling its MI350 chip series and teasing the MI400 platform, due in 2026. The specs were aggressive — 2.3TB memory platforms, air and liquid-cooled GPU clusters, and real-time cloud access for developers via the new AMD Developer Cloud. It’s a full-stack counter to Nvidia’s DGX Cloud and GB200 architecture.

Despite solid fundamentals, AMD’s stock is still lagging, down 24% over the past year, compared to Nvidia’s +7%. But if execution matches ambition, that gap could narrow quickly in 2H25.

Adobe added more fuel to the AI fire, beating earnings and revenue expectations and raising its full-year guidance. CEO Dan Durn highlighted continued investment in AI-enhanced creative tools, reinforcing the thesis that monetizable AI isn’t just about chips, it’s about workflow.

Economic Framework: Sentiment, Labor, and What the Fed Sees Next

Today’s focus is on University of Michigan Consumer Sentiment. Markets expect a slight rebound, but the real tell will be in the 1-year and 5-year inflation expectations, especially given crude’s overnight spike.

Meanwhile, jobless data continues to quietly deteriorate. Continuing claims are now at 1.956 million — the highest since November 2021. That doesn’t scream crisis, but it does suggest the labor market isn’t as resilient as the May NFP headline made it seem.

Inflation may be moderating, but growth is, too, and that’s where the Fed finds itself boxed in. A new conflict-induced oil shock complicates the path to easing just as markets were getting comfortable with a September cut.

Strategic Outlook: Shock, But Not Structural

The S&P 500 was within 2% of all-time highs before the airstrike. Today’s selloff is sharp but orderly — not a trend-breaker unless we see direct retaliation against U.S. assets. My base case is this shock leads to a test of the 200-day moving average, not a structural breakdown. That would offer patient bulls a fresh entry point, not an exit sign.

Breadth remains healthier than it’s been in years. Seven of eleven S&P sectors are outperforming the index YTD. The Magnificent Seven are lagging, but that’s healthy — it’s broadening, not breaking.

Watch oil. Watch VIX. But don’t throw out the bullish playbook just yet.

Analyst Recommendations

Final Thought

This isn’t the time to rotate into defensives. I don’t see this shock as the start of a structural risk-off, unless Iran responds with a direct attack on U.S. assets. So far, that hasn’t happened.

For those who followed my April call on QQQs, you’re still sitting on 20–25% upside. The AI trade is intact. Semis, cloud, and software are still leading. This may be the kind of pullback we’ve been waiting for — the kind I’ve flagged before as a test of the 200-day moving average. That wouldn’t invalidate the bull market. It would reset it.

A well-timed shock doesn't end the cycle. It just tests conviction.

Please feel free to reach out to me on LinkedIn or by email if you would like help navigating this market environment or have any planning-related questions.

Dan Sheehan

[email protected]

This newsletter is for informational purposes only and should not be considered as investment advice. Please consult with your financial advisor about your specific situation.