Major hedge funds including Citadel, ExodusPoint, and Millennium Management suffered significant losses last week as Middle East conflict sent oil prices soaring and triggered a bond market sell-off. Citadel's flagship Wellington fund lost 2 percent, while ExodusPoint's fixed income portfolio also dropped 2 percent, erasing its year-to-date gains.

Traders grappled with extreme volatility after US and Israeli strikes on Iran, pushing Brent crude from $119 to $84 per barrel within 24 hours. The sudden price swings forced investors out of bullish positions in short-term government debt, particularly painful for those betting on continued rate cuts. German two-year bond yields jumped 0.3 percentage points to over 2.3 percent.

Multi-manager firms, which operate hundreds of trading teams across various asset classes, saw their performance ripple through broader markets. The turmoil forced rapid reassessment of interest rate expectations, with traders now pricing in potential ECB rate hikes instead of cuts. Market participants described widespread "stop outs" as investors exited lossmaking positions amid spectacular volatility that had previously encouraged excessive risk-taking.