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The Pentagon flatly denied a Financial Times report on Tuesday that Defense Secretary Pete Hegseth's broker at Morgan Stanley contacted BlackRock in February about a multimillion-dollar investment in a defense industry ETF in the weeks before the U.S.-Israeli attack on Iran.
The Pentagon called the allegation "entirely false and fabricated," as the Financial Times stood by its report, citing three sources familiar with the matter.
The Financial Times reported, citing three sources familiar with the matter, that Hegseth's Morgan Stanley broker contacted BlackRock in February about making a multimillion-dollar investment in the asset manager's Defense Industrials Active ETF, ticker IDEF, shortly before the U.S. launched military action against Tehran.
"The inquiry on behalf of the high-profile potential client was flagged internally at BlackRock," the sources said.
The IDEF fund is a $3.2 billion equity fund that pursues "growth opportunities by investing in companies that may benefit from increased government spending on defense and security amid geopolitical fragmentation and economic competition," according to BlackRock.
Its largest holdings include RTX, Lockheed Martin, Northrop Grumman and Palantir, all of which count the U.S. Department of Defense as their biggest customers.
The investment did not ultimately go ahead.
The fund, which launched in May last year, was not yet available for Morgan Stanley clients to purchase at the time of the approach.
It is not known whether Hegseth's broker subsequently sought an alternative defense-focused fund.
Pentagon spokesman Sean Parnell wrote on X: "This allegation is entirely false and fabricated. Neither Secretary Hegseth nor any of his representatives approached BlackRock about any such investment."
Parnell called the report a "baseless smear designed to mislead the public" and demanded an immediate correction. BlackRock and Morgan Stanley declined to comment.
Hegseth has been described as one of the chief architects of the Iran war and one of the Trump administration's most vocal advocates for attacking the Islamic Republic.
Trump has identified Hegseth as the first in his national security circle to push for war.
Defense Secretary Hegseth previously told reporters, "Iran tried to kill President Trump, and President Trump got the last laugh."
Hegseth's most recent financial disclosure, released in June 2025, showed he sold stock in 29 different companies, with values ranging from $1,001 to $50,000 each.
While at Fox News from 2022 to 2024, Hegseth earned $4.6 million in salary, nearly $500,000 from two book advances, $100,001 to $1 million in royalties and almost $900,000 in speaking fees, according to his Senate confirmation disclosure.
The IDEF fund has risen 28% over the past year but has fallen approximately 13% in the past month since the start of the Middle East war.
Wall Street analysts have been scrutinizing trades made in financial and prediction markets ahead of decisions taken by the Trump administration.
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