Hedge funds moved quickly to assess exposures and reposition portfolios after weekend attacks on Iran by the US and Israel triggered sharp market swings and raised fears of prolonged instability across the Middle East, according to a report by Bloomberg.
Trading desks across Asia-Pacific were on alert as markets opened, with volatility spiking in oil, currencies and regional equities. Singapore-based Dymon Asia Capital had senior staff covering the Wellington open, while executives convened emergency calls to plan responses should the conflict escalate further.
Oil prices jumped more than 13% at the open before paring gains, while risk-sensitive currencies such as the Australian and New Zealand dollars weakened. Haven assets including the US dollar and Treasuries initially rallied, underscoring hedge funds’ focus on managing macro risk rather than taking directional bets.
The uncertainty followed a dramatic escalation in which US and Israeli strikes reportedly killed Iran’s Supreme Leader and hit defence sites, prompting retaliation across the region. The prospect of prolonged turmoil left global investors with limited visibility on next steps, a challenge for hedge funds navigating already fragile markets shaped by tariff uncertainty and AI-related volatility.
Former hedge fund manager Stephen Diggle, whose Artradis Fund Management profited during the global financial crisis, said the selloff could create tactical opportunities. He argued Iran’s relative isolation from global trade may limit the long-term disruption, though he cautioned that Asia is particularly exposed through energy markets and the Strait of Hormuz.
For hedge funds with Asia-focused strategies, the conflict has sharpened attention on oil-linked trades and currency volatility. Diggle suggested trimming China exposure given its reliance on Gulf energy supplies, while seeing scope for volatility trades in Asian currencies versus the dollar.
Beyond markets, the turmoil has raised broader concerns for funds with a regional footprint. Dubai, a major hub for hedge funds and family offices, saw flights suspended after its main airport was hit, prompting questions about operational resilience and longer-term capital allocation to the region.
While some managers view the shock as tradable rather than systemic, hedge funds are bracing for further swings as geopolitics adds another layer of risk to an already unsettled global market backdrop.
