The Iran war is shaping up to be history’s first global conflict fought inside the stock market.
At 7:27 a.m. Monday, before the New York Stock Exchange’s opening bell, President Donald Trump posted on Truth Social, “Great progress has been made” in negotiations with “A NEW, AND MORE REASONABLE, REGIME to end our Military Operations in Iran.” There’s no evidence any of this was true. Trump’s aim was not to inform the public about the war’s progress but rather to halt the previous Friday’s stock market drop. On Tuesday, The Wall Street Journal reported that Trump was weighing an end to the war without reopening the Strait of Hormuz. That also stemmed stock market losses. But these are sure to resume when shareholders think through what an extended shutdown of that waterway would mean for the global economy.
Now we have a bombshell report from the Financial Times that Defense Secretary Pete Hegseth’s broker tried to invest for him millions in major defense companies in the weeks before the war started—presumably so Hegseth could profit financially from the imminent shedding of American soldiers’ blood. This is something that in ordinary times (remember those?) would have got Hegseth fired within 24 hours. In the cesspool that is Trump’s second term, that’s going to take longer, but my guess is Hegseth is toast.
Of course, Hegseth denies it. Shortly after the FT story was posted Monday night, Pentagon spokesman Sean Parnell said on X: “This allegation is entirely false and fabricated. Neither Secretary Hegseth nor any of his representatives approached BlackRock about any such investment. This is yet another baseless, dishonest smear designed to mislead the public. We demand an immediate retraction. Secretary Hegseth and the Department of War remain unwavering in their commitment to the highest standards of ethics and strict adherence to all applicable laws and regulations.”
But the FT story cites “three people familiar with the matter.” Three people is pretty solid, even when none speaks for attribution. What this trio attests is that in the weeks prior to February 28, when the bombing began, Hegseth’s Morgan Stanley broker approached BlackRock about making a multimillion-dollar investment in its Defense Industrials Active Exchange ETF, or exchange traded fund. An ETF is a sort of mutual fund built around a specific industry sector or index, except instead of selling multiple stocks and bonds, the ETF packages these into a single financial instrument that trades like a stock. Among the companies in which the ETF in question invests are RTX, Lockheed Martin, Northrup Grumman, and Palantir, all of which experienced huge surges in stock price in early March.
In the end, FT reported, the blood-money trade did not go through—not because Hegseth had an attack of remorse but because the ETF was not available to Morgan Stanley clients. Still, many others likely knew of Hegseth’s broker’s request because, per the FT, it was “flagged internally” at BlackRock. The Justice Department, the Commodity Futures Trading Commission, and the Securities and Exchange Commission may do their utmost to avoid any investigation, but with evidence this strong I don’t know how long they can hold out. In addition, the New York attorney general’s office has jurisdiction over financial misbehavior. Letitia James, tuck in!
Ironically, BlackRock may have done Hegseth a kindness by declining his broker’s alleged request: The ETF has fallen 13 percent over the past month. But it had a nice bump in early March; if Hegseth was prepared to move quickly, he might have turned a tidy profit.
For Hegseth, an investment of “millions” would be reckless not just legally, but also financially. His net worth is only about $3 million, according to a report last year by Forbes. He made a big salary at Fox News ($4.6 million over not quite three years, per his government disclosure form), but in 2022 he and his wife bought a $3.2 million house in Tennessee on which they pay a $19,000-plus monthly mortgage. Hegseth also has two ex-wives to support. Perhaps the alleged attempted insider trade was the Hail Mary pass of a guy struggling to get solvent. We know Hegseth’s in over his head in all sorts of ways; very possibly he’s in over his head financially too.
The Iran war seems to be generating quite a lot of insider trading. On March 23, Trump publicly backed away from a 48-hour ultimatum that if Iran didn’t surrender the United States would attack Iranian power plants and energy infrastructure. Once again, Trump did this before the stock market’s opening bell. “THE UNITED STATES OF AMERICA, AND THE COUNTRY OF IRAN, HAVE HAD, OVER THE LAST TWO DAYS, VERY GOOD AND PRODUCTIVE CONVERSATIONS REGARDING A COMPLETE AND TOTAL RESOLUTION OF OUR HOSTILITIES IN THE MIDDLE EAST,” Trump posted on Truth Social. FT reported last week that 15 minutes before Trump posted, traders bet half a billion dollars on the oil markets, with more than 6,000 futures contracts on Brent and West Texas crude changing hands between 6:49 and 6:50 a.m. Trading volumes for Brent and West Texas crude surged at the same time. Bloomberg put it this way: Contracts on six million barrels of oil traded during that brief interval. The average traded during that same time period over the previous five days was fewer than one million.
John Cassidy noted in The New Yorker that this wasn’t the first time traders appeared clairvoyant about Trump’s actions. “The day before the war began,” he wrote, “six accounts on Polymarket, the online prediction site, wagered that the U.S. would strike Iran within forty-eight hours, netting profits of more than a million dollars. In January, another Polymarket account won big by betting that Nicolás Maduro, the President of Venezuela, would soon be out of power.”
Iran has also been waging war in the stock market. “Heads up,” Mohammad-Bagher Ghalibaf, speaker of Iran’s Parliament, posted on X last Sunday. “Pre-market so-called ‘news’ or ‘Truth’ is often just a setup for profit-taking. Basically, it’s a reverse indicator. Do the opposite: If they pump it, short it. If they dump it, go long. See something tomorrow? You know the drill.” Ghalibaf has also used X to try to choke off the American bond market. “Alongside military bases, those financial entities that finance the US military budget are legitimate targets,” Ghalibaf posted March 22. “US treasury bonds are soaked in Iranians’ blood. Purchase them, and you purchase a strike on your HQ and assets. We monitor your portfolios. This is your final notice.” And on March 21, Ghalibaf worked to push up oil prices with the post, “Lifting sanctions on Iranian oil currently stranded at sea? Sorry—we’re sold out.”
Except possibly on oil prices, Ghalibaf’s attempts to manipulate markets haven’t been successful; 10-year Treasury bond yields fell (i.e., purchases rose) after Ghalibaf threatened to kill people who bought Treasuries, and Ghalibaf’s “sold out” post appears to be an outright lie. Ghalibaf’s assertion that Trump’s pre-market news was bullshit was, as my TNR colleague Malcolm Ferguson pointed out, dead on, but it didn’t influence the market. Shutting down the Strait of Hormuz, which dwells outside cyberspace, was a much more effective move.
It should be noted that we have no evidence Ghalibaf is trying to enrich himself or his friends with his social media pronouncements. For now, anyway, that’s more of a Trump administration tactic.
