The United Kingdom’s biggest so-called Sharia-compliant fund spent more than $130 million to buy shares in several companies linked to the Israeli military amid an ongoing genocide in Gaza, pogroms in the occupied West Bank, and occupation of southern Lebanon.
HSBC, Europe’s second-largest bank, invested the funds through its Islamic Global Equity Index Fund in companies linked to Israel’s military supply chain – from components used in weapons to technology and equipment with military applications.
The firms range from US tech giant Palantir to the world’s second-largest arms company, RTX.
Israel’s genocidal war on Gaza has killed more than 74,300 Palestinians since October 2023, including nearly 1,500 killed since a “ceasefire” was agreed upon last year.
Israel’s war, which has devastated the Palestinian enclave of 2.3 million people, has drawn global condemnation.
Investments by the HSBC fund raise several questions, including: can money marketed as being compliant with Islamic law flow into companies linked to the Israeli military?
What is HSBC’s Islamic Global Equity Index Fund?
With more than $8bn in assets, HSBC’s Islamic fund channels the savings of investors, expected to be predominantly Muslim, into global equities screened against Islamic financial principles.
The bank’s website for the fund says it delivers “both investment returns and better outcomes for society as a whole”, describing its Sharia philosophy as “ethical investments that enhance society”.
It is supposed to exclude businesses and financial practices deemed forbidden under its Islamic law screening rules, with oversight from a Sharia committee.
HSBC says it has an independent Sharia Committee consisting of two internationally renowned Islamic scholars overseeing investment in the fund “to ensure compliance with Islamic principles”.
Under its own Sharia philosophy that dictates the fund’s investments, as reviewed by Al Jazeera, HSBC says it ensures that a “company has no significant exposure to non-permissible revenue sources such as selling goods or services related to … weapons”.
Wahyu Jatmiko, a lecturer at the University of Southampton Business School, with a focus on Islamic finance, told Al Jazeera that there are “strong grounds to criticise HSBC’s governance, transparency, and handling of investors’ ethical expectations.”
“The strongest concern is the apparent tension between its stated restrictions and the reported investments,” he said.
“This should also be a lesson for the whole Islamic finance industry. The ‘Sharia’ label should mean something; it carries expectations about investing differently and realising the higher ethical objectives of Islamic law,” Jatmiko told Al Jazeera.
To which companies did HSBC channel its Sharia-compliant fund?
An analysis of the HSBC Sharia-compliant fund’s activities in the first half of 2026 shows that the bank purchased shares in at least five companies linked to the Israeli military’s wars in the Middle East.
These purchases were first reported by Middle East Eye and Hyphen news publications.
Palantir
Palantir Technologies, a US data analytics and artificial intelligence company, has faced scrutiny over its support for Israel’s military. In January 2024, the company announced a strategic partnership with Israel’s Ministry of Defence to support “war-related missions” and held a board meeting in Tel Aviv in solidarity with Israel.
Hyphen reported last week that HSBC’s fund purchased $38.3m worth of shares in the US tech giant.
Palantir’s software integrates large volumes of data to help military and intelligence agencies analyse information and make operational decisions.
A United Nations report in June 2025 identified Palantir Technologies as expanding its support to the Israeli military since the start of the Gaza war. The report said there were “reasonable grounds” to believe the company provided automatic predictive policing technology used for automated decision-making in the battlefield, to process data and generate lists of targets, including through artificial intelligence systems such as “Lavender”, “Gospel” and “Where’s Daddy?”
The US military also reportedly relied on Palantir’s systems in falsely identifying a school in the Iranian city of Minab as a target in a strike that killed more than 150 people, mostly children, on February 28 , the first day of the US-Israeli war on Iran.
Senior figures at the United Nations have also argued that technologies such as Palantir’s determine the pace and scale at which the Israeli army is able to target people.
RTX
HSBC’s fund also purchased $35.7m worth of shares in RTX, among the world’s biggest arms companies, in the first half of this year, the Middle East Eye reported.
RTX Corporation is a US defence company whose businesses include Raytheon, a major manufacturer of missiles, air-defence systems, and military technologies.
Through Raytheon, the corporation partners with the Israeli government-owned Rafael Advanced Defense Systems company to manufacture components and Tamir interceptor missiles for the Iron Dome air-defence system.
Raytheon and the Israeli company also jointly developed David’s Sling, another Israeli missile-defence system. Raytheon also makes Tomahawk missiles and MIM-104 Patriot missile systems for the US military, which have been used in the war on Iran, in addition to providing components to F-series fighter jets that are deployed in the occupied Palestinian territory.
Analog Devices
HSBC also invested $20.3m in shares of Analog Devices, a US semiconductor company that has shipped components to Elbit Systems, Israel’s biggest privately -owned weapons manufacturer, amid Israel’s genocide in Gaza.
Analog Devices makes electronic components used in surveillance systems, aircraft, and precision-guided munitions.
In July 2025, Irish investigative outlet The Ditch reported that Analog Devices International, the company’s Irish-registered subsidiary, shipped components from its factory in the Philippines to Elbit Systems in August, October and November 2024.
Honeywell
In June 2024, Israel bombed the UN-run al-Sardi school in central Gaza’s Nuseirat refugee camp, killing nearly 40 Palestinians, including at least 14 children and nine women.
A measurement unit from the missile, used to aid with precision targeting, was manufactured by Honeywell, an American conglomerate that specialises in the design and delivery of sensors and guidance devices that are used in a variety of military weapons, an analysis by Al Jazeera had shown.
The HSBC fund purchased $18.9m worth of shares in Honeywell International.
Rolls-Royce
HSBC invested $17.6m in Rolls-Royce Holdings, the only British company identified in the list so far, which manufactures engines and propulsion systems for military aircraft and armoured vehicles.
Its German subsidiary, MTU Aero Engine, has supplied power systems for Israeli military vehicles, including the Merkava tank, Namer armoured personnel carrier, and Eitan armoured vehicle.
In 2023, Rolls-Royce Solutions America received a US military contract to supply power packs for Israel’s Eitan vehicles, with further funding added later. In April 2025, the US approved a potential $180m sale of additional Eitan engines.
How did HSBC’s Sharia fund greenlight weapons firms?
Islamic finance experts explained to Al Jazeera that there are multiple industry standards, at times specific to benchmarks, on what comes under Sharia-compliant funds, especially as they are left to the interpretation of scholars.
“Scholars translate Islamic principles into practical rules within institutions shaped by regulation and commercial pressures,” Jatmiko told Al Jazeera. For example, he pointed out, there are differences between how the S&P and Dow Jones indices identify a Shariah-compliant company. The S&P’s standard Sharia indices do not directly exclude defence companies, whereas the Dow Jones Islamic Market indices exclude them under their screening methods.
Muhammed Ebrahim, a professor of finance at the Business School of Durham University, said there is a “critical gap” in the screening process that assesses the company’s declared principal activities, not the end use of its products or its customers.
“A company classified as ‘technology’ or ‘industrial’ can pass the business activity screen even if its products end up in weapons systems. This is precisely the issue in the HSBC case,” Ebrahim told Al Jazeera. “The screening does not typically trace a company’s supply chain to determine whether its components are used in civilian harm.”
However, an investment can technically be Sharia-compliant, but ethically incompatible with Islamic principles, and “the HSBC case illustrates this gap starkly,” he said.
“The maqaṣid of Islamic law [goals of Islamic doctrine] – including the preservation of life [ḥifẓ al-nafs] and justice [adl] – are not captured by a mechanical sector-exclusion test,” said Ebrahim.
Ebrahim argues that screening should trigger a threshold over any involvement in weapons production or military contracting, review any indirect involvement, and trace the end-use of products.
“The current system does none of these systematically. It relies on sector classification and financial ratios, not supply-chain and end-use analysis,” he said.
HSBC has failed its Muslim customers by investing in Israeli military-linked companies, said Ebrahim.
“The fund is marketed as ‘Sharia-compliant’ to Muslim savers, many of whom hold it through halal pension schemes,” he argued, adding that “those investors reasonably expect that their money is not funding companies implicated in civilian harm.”
Ebrahim and Jatmiko agreed on a core issue: that Islamic finance outsources “ethical judgement to screening providers whose methodologies are opaque and whose definitions are narrow”.
“The HSBC case is a wake-up call: technical compliance is not the same as ethical fidelity,” said Ebrahim. “Funds that invoke the Sharia label have a responsibility to ensure that the substance, not just the form, aligns with the objectives of the law.”