LONDON – Millions of Muslim savers trust Islamic investment funds to keep their money aligned with Sharia principles. But a new investigation raised questions about where that money is going. HSBC’s Islamic Global Equity Index Fund reportedly held more than $100 million in companies linked to Israel’s military during the first half of 2026, putting its investment standards under fresh scrutiny amid the devastating war in Gaza.
A report by Middle East Eye sparked new debate over whether Islamic investment standards adequately account for companies’ involvement in arms production and military operations.
The investments were made through HSBC’s Islamic Global Equity Index Fund, which reportedly includes money from numerous UK halal pension schemes. The findings have raised questions about how companies are assessed under Sharia-compliant investment rules, particularly amid mounting scrutiny of corporate links to Israel’s war in Gaza.
Among the fund’s holdings are millions of dollars in shares of major defence contractors and technology companies whose products or components have been linked to Israel’s military capabilities.
The fund held approximately $35.7 million in RTX, one of the world’s largest defence contractors. RTX subsidiary Raytheon works with Israeli defence company Rafael on interceptors for Israel’s Iron Dome missile defence system.
An organisation campaigning against the arms trade has also accused RTX of supplying missiles and other military equipment to Israel. The company’s weapons and components have been linked to F-15, F-16 and F-35 fighter aircraft used in Gaza.
The fund also invested $20.3 million in US semiconductor manufacturer Analog Devices. The report said the company supplied key components to Elbit Systems, one of Israel’s largest arms manufacturers, in 2024. Elbit is a major supplier of ground-based military equipment and combat drones to the Israeli armed forces.
Another major holding was Honeywell, in which the fund invested $18.9 million. According to report, a system manufactured by Honeywell was found in a missile used in an attack on a school in Gaza in June 2024. At least 40 Palestinians were killed in the attack, including 14 children and nine women.
The fund also held $17.6 million in shares of British engineering giant Rolls-Royce. According to the report, the company’s engines are used in Israeli Merkava tanks and certain military vessels.
Meanwhile, the fund held approximately $9.4 million in shares of British defence company BAE Systems, which manufactures components for F-35 fighter jets.
The controversy extends beyond traditional arms manufacturers.
An earlier investigation by Hyphen revealed that HSBC’s fund had invested $38.3 million in Palantir, the US technology company. Palantir announced partnership with Israel’s Ministry of Defence involving the use of its technology in military operations.
The investments intensified scrutiny of the distinction between conventional arms manufacturers and technology firms whose products may support military planning, intelligence gathering or operational decision-making.
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