Stocks closed lower on Friday with most of the indexes down for the week. The big 3 indexes were down for the fifth week in a row. But the small-cap Russell 2000 and mid-cap S&P 400 both managed to finish up for the week, stopping their weekly losing streak at four weeks.

Regardless, Middle East tensions have weighed on stocks. The Dow joined the Nasdaq in correction territory (-10.01% and -12.56% respectively), while the S&P 500, Russell and S&P 400 are in pullback territory with losses of -8.74%, -9.90%, and -8.21%.

A pullback is defined as a decline between -5% and -9.99%, and they happen on average of 3-4 times a year, while corrections are defined as a decline between -10% and -19.99%, and they happen on average of about once a year. As painful as they are when going thru them, they are very common. Every bull market has them.

Although, the Iran situation is exacerbating it.

Despite President Trump, on Thursday, extending the deadline to 4/6, for Iran to accept a peace plan or risk the U.S. attacking their power plants, the market saw no relief. While talks are ongoing, all sides continue to strike each other, and Iran's proxies have entered the mix as well.

The threat of an expanded war, and a prolonged one, are real. All while the Strait of Hormuz remains effectively closed, which is sending oil prices sharply higher. Crude oil was up another 5.5% on Friday. It's up 48.7% since the war began. And, it's up 73.5% YTD.

This will be week 5 of the conflict. When it started, it was estimated to last 4-6 weeks.

If no peace agreement emerges by 4/6, and Iran's power plants are bombed, which will prompt more retaliation from Iran, that would put the war at week 6, with no end in sight. (One of the key necessities for hostilities to end is an assurance from Iran the Strait will reopen.)

Even though the Middle East conflict is weighing on stocks, I maintain that the market was due for a pullback anyway, after heady gains.

Plus, it's important to remember that geopolitical conflicts and events usually only have a short-term impact on the markets. In fact, over the last 40 years of geopolitical shocks, markets usually bounce back quite fast. And historically, they are typically higher 12 months later. Same goes for 6 months. Even the 3-month outlook leans positive.

And if you know pullbacks and corrections are commonplace, and geopolitical impacts on the market are usually short-lived, you can instead look at them as opportunities to buy rather than places to sell.

The higher energy prices, while acting as a tax on consumers and business, are also adding to inflation worries. But event-driven price increases are different than persistent, underlying core inflation, as the price of oil is expected to fall sharply once the conflict ends. And I would make the argument that higher energy prices are less a concern for inflation, but more of risk for the overall economy. And for that, I don't see interest rates staying at these levels for long.

While the market is expecting one, 25-basis point rate cut this year, albeit at the end of the year, I would not be surprised to see that timeline moved up to provide some relief to the economy.

In the meantime, Middle East headlines will continue to influence the market. Both good and bad.

Hopefully, we'll get a little more good than bad this week.

See you tomorrow,