It was resetting because in effect with the raw LED you had a short (or at least about 1.2V ) on your supply. This was dragging the voltage rail so the processor stopped. When it stopped the output pin reverted to an input and stopped drawing current allowing the voltage rail to recover and the processor to restart.
You might get away with a visible LED connected without a resistor, it will still damage the output but not restart the processor because the forward voltage is higher than an IR LED.