Markets Poised for Further Gains as Iran Conflict Winds Down, Says Portfolio Manager Dan Niles

The S&P 500 is on pace for its 20th record close of the year and a ninth consecutive week of gains, with the broader index posting back-to-back double-digit percentage gains over the past three years. Against this backdrop, Goldman Sachs has raised its year-end S&P 500 target from 7,600 to 8,000, signaling confidence that the rally will continue. 

Dan Niles, founder and CEO of Niles Investment Management, offered perspective on the market’s resilience amid geopolitical uncertainty. Drawing a parallel to the late 1990s, Niles noted that during years three and four of the internet infrastructure buildout (1997-1998), macroeconomic scares—including the Asian currency crisis and Russian bond default—temporarily knocked the S&P 500 down 19%. Yet both years ultimately finished up 31% and 27%, respectively. Since the market bottom on March 30, the S&P 500 has rebounded 19%, while the semiconductor index has surged 80%. 

“The Iran war situation is going through fits and starts, but it will wind down,” Niles stated. “That will get lower oil and put juice in the market.” He emphasized that artificial intelligence remains the fundamental backdrop supporting equities, adding he sees no reason the market cannot trend higher. 

Regarding investment positioning, Niles highlighted consumer discretionary names as attractive opportunities, particularly those pressured by oil prices in the $90-$100 range. He pointed to Disney and TKO Group Holdings, which are down approximately 10% year-to-date versus the S&P 500’s 10% gain, as offering compelling risk-reward profiles. “Those stocks are still pretty much on their backs versus AI, which no surprise, is a good place to be investing in,” he said. 

On the geopolitical front, Niles connected oil prices to the upcoming midterm elections. “If oil is not down by then, the incumbent party will get killed at the polls based on history,” he explained, suggesting this dynamic creates incentive for President Trump to seek resolution in the Iran situation promptly. While acknowledging the path forward will be a “messy process,” Niles anticipates increased production from regions like Venezuela could help offset Middle East supply concerns and bring oil prices down from current levels near $89 per barrel toward the pre-conflict range around $67. 

Niles, an electrical engineer by training who began his career as a research analyst, reaffirmed his conviction in semiconductors. “Every great technological revolution—whether canals, railroads, the internet, or AI—you have had a bubble,” he observed. “That doesn’t mean the bubble can’t keep inflating for a long period of time.” He noted that semiconductors sit at the core of AI advancement, with generative AI driving a 10- to 100-fold increase in compute demand compared to simpler query models. This step-change in demand should sustain growth in the sector. 

Addressing concerns about valuation, Niles referenced Federal Reserve Chairman Alan Greenspan’s “irrational exuberance” remark from December 1996. “If you are early in calling a bubble, you are just wrong,” he said. He distinguished the current AI cycle from the internet era by the magnitude of the compute demand shift. Looking ahead, Niles expects one more year of strong growth, citing S&P 500 earnings growth of approximately 25% for the year as a key support for equities. He noted that companies like NVIDIA trade at about 25 times forward earnings with 80% revenue growth expectations, while Micron’s forward P/E sits near 16. 

“Strong EPS growth for this year should keep the market going higher throughout the end of the year,” Niles concluded.