Citi is slashing risk exposure across multiple macro positions following a sharp volatility spike driven by geopolitical tensions. Analyst Dirk Willer described the market disruption as a VAR shock that could intensify before stabilizing. The bank has unwound several positions including its long position, exited HUF and BRL receivers, and closed its long 30-year Gilts versus OATs trade.

Willer emphasized that risk management now takes priority as cross-asset moves feel like a systematic shock. The bank has reduced exposure where positioning is stretched, particularly in EM FX carry and rates markets. The U.S. dollar has reemerged as a risk-off hedge amid the turmoil, with Citi noting that the terms of trade shift following Iran-related headlines has outweighed other market drivers.

Citi respected its drawdown limits by closing its long EURUSD spot trade as the pair hit trigger levels. While Willer acknowledged these geopolitical shocks are typically short-lived, he stressed that "buying the dip just one day too early can create major losses." The bank is maintaining a defensive stance until volatility subsides, with plans to rebuild positions once market conditions stabilize.