U.S. Secretary of Defense Pete Hegseth attempted to make a major investment in leading defense contractors just before launching airstrikes against Iran, according to foreign media reports. The revelation has put the nation's top security official under scrutiny as suspicious trades ahead of major policy announcements by the Trump administration have repeatedly surfaced in financial markets, fueling growing insider trading concerns.
The Financial Times reported Wednesday, citing multiple sources, that a Morgan Stanley broker representing Hegseth contacted asset manager BlackRock in February to explore the possibility of investing several million dollars in an actively managed defense industry exchange-traded fund (ETF). The inquiry was reportedly made just before the United States initiated full-scale military action against Iran.
The product in question is a $3.2 billion equity fund trading under the ticker "IDEF." The fund invests in companies expected to benefit from geopolitical tensions and increased military spending. Its top holdings include major defense contractors that count the U.S. Department of Defense as a key client — such as RTX, Lockheed Martin and Northrop Grumman — as well as data analytics firm Palantir.
However, the investment reportedly never went through. Although the ETF launched in May last year, it was not available for trading through Morgan Stanley at the time. IDEF has gained 28% over the past year but has fallen approximately 13% over the past month following the Middle East conflict. As a result, the failed investment attempt effectively spared Hegseth from short-term losses.
Critics point to a serious conflict of interest, given that the official who was the earliest advocate for military action within the Trump administration's national security apparatus attempted to invest in defense firms just before war broke out. The FT noted that "the fact that the defense secretary's side sought to invest in defense stocks at a time when the Pentagon was preparing a major military operation could itself trigger conflict-of-interest concerns."
The matter is drawing heightened attention as it coincides with multiple insider trading allegations related to the recent Iran conflict. Major media outlets previously reported that large-scale trades in crude oil futures and stock futures were detected just before President Trump announced a decision to suspend strikes on Iranian energy facilities. In connection with these developments, CNN reported that U.S. federal prosecutors have launched an investigation into potential insider trading on major prediction markets. According to the report, the U.S. Attorney's Office for the Southern District of New York is discussing how to apply existing laws to potential illegal activity on prediction markets.
The Department of Defense, however, has pushed back, calling the reports false. Pentagon spokesman Sean Parnell called the article "completely false and fabricated" and demanded a correction.
