Good morning, investors. The US targeted Iran’s nuclear facilities with missiles on Saturday, and President Trump said any retaliation from Iran would be met with “force far greater” than that initial strike.

Stock futures fell overnight while oil prices climbed. Today’s edition unpacks what you need to know.

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How markets react to war

Investors’ jitters around a trade war have evolved into anxiety for a hot geopolitical conflict.

On Saturday, the US attacked three Iranian nuclear sites, Fordo, Natanz, and Esfahan. President Trump called the strike successful in an address to the nation shortly afterward, while Iran’s Foreign Minister Abbas Araghchi called it “outrageous” on Sunday. 

In light of the uncertainty, investors expect heightened volatility across markets, though some say any pullbacks in stocks could ultimately present an attractive buying opportunity. 

Gene Goldman, CIO for Cetera Investment Management, expects a classic market reaction to geopolitical events:

• Falling stocks

• Rising oil

• A surge in safe-haven assets like bonds, the US dollar and gold 

“Investors are likely to act first and ask questions later,” Goldman told Opening Bell Daily. “The risk of a market selloff is likely, but market dips can be tactical buying opportunities.”

He noted that these geopolitical market reactions tend to be short-lived, and that 7 of the last 9 saw the S&P 500 higher 12 months later. 

Indeed, the benchmark index has averaged 14.2% one-year forward returns after major geopolitical events since the Korean War. 

“If Iran closes the Strait of Hormuz or launches a meaningful retaliatory strike, as has been reported by the media as possible outcomes, we expect that a 2% to 3% volatility range is possible in the near term for the S&P 500,” Larry Tentarelli, chief technical strategist for Blue Chip Daily told Opening Bell Daily.

“If both outcomes are avoided, we would expect a 1-2% initial pullback.”

In either case, Tentarelli said his firm would be looking to buy into defense stocks, energy, nuclear, gold and gold miners. 

To Daniel Bustamante, founder and CIO of Bustamante Capital, the Iran bombing marks a turning point for what has been a headline-driven market in recent weeks. 

Talks of a new deal with Iran will be a positive catalyst for stocks, Bustamante told Opening Bell Daily, but that could just as easily be replaced with negative sentiment should Iran choose to close the Strait of Hormuz, a narrow transit point for about 20% of the world’s oil supply. 

Traders on the prediction market Kalshi currently see 30% odds of a new US-Iran nuclear deal in 2025, down from 57% less than a week ago.

Meanwhile, Tom Essaye, founder of Sevens Report Research, told Opening Bell Daily that as long as there is no escalation, he does not see the event as a “new negative” for markets. 

“In some ways, this removes a potential unknown from the markets because it was unclear whether the US would strike or not,” Essaye said.

What about oil prices?

At the start of June, Brent crude, the international benchmark, hovered at $62 a barrel. 

That’s since jumped roughly 30% to nearly $80, given that Iran is a critical player in global energy markets.

Morgan Stanely’s Martijn Rats said Sunday that he sees three scenarios for oil: 

• A quick resolution would drag oil prices back to $60 a barrel

• Continued tension and uncertainty with Iran could leave prices near $80

• Fundamental disruption to oil supply, like closing the Strait of Hormuz, could push oil “a lot higher from here”

On Sunday, US Secretary of State Marco Rubio called on China — Iran’s biggest oil customer — to stop the country from blocking the Strait of Hormuz.

Market snapshot

Elsewhere

💣️JD Vance says US isn’t at war with Iran, but with “Iran’s nuclear program.” The VP’s comments came hours after the US strike, and he said that the US does not want further escalation with Iran: “We peace in the context of them not having a nuclear weapons program, and that’s exactly what the president accomplished last night.” (CNBC)

📊 Some retail investors have cold feet on Big Tech. Traders are re-evaluating their holdings in the Magnificent Seven after April’s market rebound, with some shifting toward international stocks, small-caps, utilities, and consumer staples. Indeed, Vanda Research suggests investors have cut back on tech stock purchases in recent weeks. (WSJ)

Rapid-fire

• Markets across the Middle East ended mostly higher on Sunday (CNBC)

• Tesla launched its robotaxis in Austin on Sunday (Barron’s)

• Bitcoin fell below $99,000 in the hours after the Iran strike (Bloomberg)

• The Bank of NY Mellon approached Northern Trust for a potential merger (WSJ)

• War and geopolitical uncertainty has boosted the US dollar after months of weakness (WSJ)

• Defense Secretary Hegseth said the Iran strike was not about “regime change” (CNBC)

• Charlie Munger had mental models for everything (Blog)

• The OKC Thunder became the youngest NBA championship team in four decades (WSJ)

Last thing

About me

📰 I’m Phil Rosen, co-founder and editor-in-chief of Opening Bell Daily. I’ve published books, lived on three continents, and won awards for my journalism, which has appeared in Business Insider, Fortune, Yahoo Finance, Bloomberg and Inc. Magazine.

I write our flagship newsletter to prepare you for each trading day — unpacking markets, economic data and Wall Street with analysis you won’t find anywhere else.

Feedback? Reply to this email, ping me on X @philrosenn, or write me directly at [email protected].