Goldman Sachs' fixed-income traders were caught off guard when the Iran war upended monetary policy expectations, inflicting substantial losses on the bank from positions tied to the trajectory of global interest rates. Goldman's rates desk was the main driver of the bank's disappointing performance in fixed income, commodity and currency trading in the first quarter. The FICC unit posted a 10 per cent drop in revenues, widely missing the 10 per cent rise analysts forecast and trailing double-digit gains at rivals JPMorgan Chase, Citigroup and Morgan Stanley.

Goldman had positioned itself for a US economic slowdown, holding tech and AI-linked positions that would suffer in a weaker climate while simultaneously holding positions that would pay out if the Federal Reserve cut rates. However, the Iran war, which began at the end of February, upended those positions by raising the threat of higher inflation and slower growth. This pushed markets to price in the risk that the Fed, as well as the Bank of England and European Central Bank, could raise borrowing costs, punishing the positions Goldman had taken.

Finance chief Denis Coleman told analysts that lower revenues in interest rates and mortgage trading resulted from a tougher market-making backdrop, offset partially by strength in currency and commodity trading. President John Waldron defended the results at a conference, noting that in periods of high volatility, "things don't go your way." The bank is still known as one that takes more market risk than peers, with Anshul Sehgal co-heading the FICC group. Despite the setback, Goldman's equities trading business delivered record revenues of $5.3bn, partially offsetting the FICC weakness.