Deirdre Dunn has been reading up about fertilizer markets.

Since the US attacks on Iran began roiling oil markets, the Citigroup Inc. rates-trading chief has been looking to other commodities to monitor the knock-on effects of the military action on inflation and how central banks might react.

“Oil became the most liquid and purest source of information for market participants,” Dunn said in an interview. Data from other markets could matter more now than they usually do, too, “such as fertilizer and aluminum.”

All that points to a clearer reality about the war: its effects are likely to linger beyond what many investors had initially thought. In other words, Dunn said, traders are starting to ask, “Who pays for all this?”

“Clients are starting to settle more in for the long haul, and the lasting implications of an energy shock,” said Dunn, 48. “Even if there is a remarkably quick resolution, the implications and pass-through to the real economy is likely to be meaningful.”

From her position atop a core part of Wall Street’s second-largest fixed-income business, Dunn sees bankers and investors getting smarter on other areas where costs might need to rise, such as insurance and the rebuilding of infrastructure, she said.

The trading executive, who joined Citigroup in 2011, has been near the center of the turmoil as hedge funds and corporates have navigated the surge in oil prices after the US and Israel attacked Iran more than four weeks ago. Banks are likely to post bumper trading revenue when they report first-quarter earnings in mid-April, driven by volatility spurred by the war.

A surge in oil prices and the threat of an inflation spike prompted interest-rate markets to sharply reverse course during March and price in central-bank hikes rather than cuts. The pendulum has swung back a little this week, as the bond market anticipates weaker growth and risk of a recession as higher energy prices, rising borrowing costs and the stock-market slump start to squeeze businesses and consumers.

To prepare for big market swings, Dunn has moved staffers around in order to help teams most under pressure. On a recent trip to Paris, she had to cancel employee events so she could spend more time with colleagues at the desks. And Dunn, who normally rises at 5 a.m. to exercise with her husband, said she’s often skipped that routine over the past month to start addressing work straight away.

“March has been a roller-coaster month,” she said. “It’s been a bit of headline ping-pong.”

Her unit is a key part of the bank’s fixed-income, currencies and commodities group, which analysts expect to post more than $4.8 billion in revenue for the first quarter when Citigroup reports earnings in two weeks, according to a Bloomberg survey. That would be the biggest haul since the onset of the Covid-19 pandemic in 2020.

Concerns about artificial intelligence and what it means for labor markets may also return to the rates market, Dunn said. She’s also monitoring concerns around private credit and possible impacts on the underlying economy as well as investors’ perception of risk.

The onset of the war in Iran and the Supreme Court ruling against the Trump administration’s tariffs increase the likelihood that the US fiscal story becomes a pressing issue and pushes longer-maturity Treasury yields higher. Under Scott Bessent, the Treasury Department has sought to keep fixed-rate bond issuance across two to 30 years steady while boosting the supply of shorter-dated bills in the $31 trillion US government-debt market.

Dunn is the chair of the Treasury Borrowing Advisory Committee, a group of bond market participants that includes banks, asset managers, insurers and hedge funds. The committee meets quarterly with the Treasury Department to discuss economic and market trends while advising on debt management.

“Market trends are now transitioning to whether there is pressure on bonds from who pays for it, how sticky is inflation going to be and how aggressive are central banks going to be,” Dunn said.

Written by: Todd Gillespie and Michael MacKenzie @Bloomberg

The post “‘Who Pays for All This?’: Citi Rates Boss Flags Lasting War Cost” first appeared on Bloomberg