WS #12215

The dominant theme remains the escalating US-Iran conflict, with the narrative arc ESCALATING. New developments include: Houthi leader threatens Saudi oil infrastructure if Riyadh escalates involvement in Yemen; US approves $2bn weapons sale to Saudi Arabia to bolster air defenses; and a US Patriot launcher in Erbil was destroyed by an Iranian drone strike. These events reinforce the geopolitical risk premium on oil and defense stocks. Separately, Dallas Fed's Logan delivered a hawkish speech calling for 'modestly higher' interest rates, stating one month of lower CPI is 'not enough' and that monetary policy is not restraining the economy. This counters any dovish pivot hopes and supports higher yields. In corporate news, DeepSeek plans to file IPO by late 2026 at a $74B valuation, which could impact AI sentiment. UnitedHealth (UNH) was upgraded by Baird to Neutral with a raised PT, and Abbott (ABT) reaffirmed strong guidance. The semiconductor selloff continues with SanDisk down 40% from peak, but there is a bullish option sweep on Micron (MU) suggesting some dip-buying. The UK economy grew 0.1% in May, a minor positive. Overall, the macro picture is risk-off due to geopolitics and hawkish Fed, with energy and defense as the main beneficiaries.