London-based hedge fund Caxton Associates has extended its losses to more than $1.3 billion this month as the Iran war causes shockwaves in global markets. Caxton's $9 billion Macro fund, run by CEO Andrew Law, is down 15 percent this month through Friday, according to two people who had seen the numbers.

The losses make Caxton one of the highest-profile hedge funds to suffer as the Middle East conflict upends energy and bond markets. Traders have dumped government debt worldwide, expecting soaring oil and gas prices to drive up inflation significantly. Brent crude has surged above $100 a barrel as Iran closed the Strait of Hormuz, restricting a vital artery in the world's oil trade.

Law was optimistic about UK gilts at year-end, telling the Financial Times there was a "mispricing" in UK yields. The move in bonds has hit hedge funds positioned for rate cuts or running steepener trades. UK government bonds have suffered particularly, with 10-year gilt yields surging to their highest level since 2008. The conflict has created unprecedented market volatility, making it extremely difficult for macro funds to navigate the rapidly shifting landscape.