The market’s Iran-driven correction has likely run its course. This is what advisors need to know

After weeks of volatility fueled by the Iran war and disruption in the energy market, advisors and their clients can now look ahead to improving market conditions, according to Paul Stanley, chief investment officer, Granite Bay Wealth Management.

With the fragile ceasefire in the Middle East still holding, major indices enjoyed significant rallies this week, with the S&P 500 index and the Nasdaq both closing at record highs Thursday. The tech-heavy Nasdaq also registered its longest winning streak since 2009, Barron’s reports.

Set against this backdrop, the Iran war-driven market correction of the last few weeks is slowly disappearing in the rearview mirror. “It's refreshing that this is the first Friday trading session in well over a month where there isn't this underlying fear heading into the weekend, which is another sign that this market correction has likely run its course,” said Paul Stanley, chief investment officer at Granite Bay Wealth Management, in a statement. “While corrections can involve a retest of the low, we would view any retests as a buying opportunity for long-term investors.”

“The Iran situation is still volatile, and oil prices are still elevated, but stocks have now already priced-in these risks and appear ready to move onto earnings and fundamentals,” he added.

The S&P 500 index is up 0.9% Friday and the Dow Jones Industrial Average is up 1.7%. The VIX volatility index, which is Wall Street's so-called "fear gauge," is down 1.2%.

Speaking at an event in Las Vegas Thursday President Donald Trump said that the war in Iran “is going along swimmingly” and “should be ending pretty soon.”

"The 'peace' narrative that has kept risk assets on a rising trend since early last week seemed to be in force again yesterday and this morning with reports of dialogue and concessions being made in indirect talks between the US and Iran," said Thierry Wizman, Global FX & Rates Strategist at Macquarie Group, in a note Friday. 

The fast-moving geopolitical situation shifted again early Friday, when Iran's Foreign Minister Abbas Araghchi wrote on X that passage for all commercial vessels through the Strait of Hormuz is "declared completely open" for the remaining period of ceasefire. 

In his note Macquarie's Wizman said that a concession by Iran to guarantee safe passage through the Strait of Hormuz "would be meaningful for sentiment and would boost global stocks again as crude oil prices fell." However, to get a durable peace, the concession needed would have to come in regard to the denuclearization of Iran, he added.

Oil prices, which have soared as a result of the US-Iran conflict, are tumbling Friday, with Brent crude futures and West Texas Intermediate crude futures both down 10.8%.

The market received another boost this week when bank earnings came in much better than expected, with JPMorgan and Citigroup topping Wall Street’s expectations and Wells Fargo beating on the bottom line.

However, Stanley of Granite Bay Wealth Management notes that expectations were lowered given the past few months of negative market sentiment. “Lower expectations are always a welcome dynamic for earnings season, since it gives companies a lower bar to clear, and that could add some extra momentum to markets over the coming months,” he added.

Expect tech to be in the spotlight. The Nasdaq is up 1.2%, reflecting a broader rebound in the tech sector. Tech stocks sold off earlier this year amid fears about AI’s impact, with the software sector taking a particular pummeling.

“It's encouraging to see tech stocks snapping back, both megacap tech and software stocks, because these stocks are very important for the overall health of the market given their weighting in the broader index and their longtime legacy of market leadership,” said Stanley.