HSBC's 'Halal' Fund Invests Over $130M in Companies Tied to Israeli Military

HSBC's Islamic Global Equity Index Fund — billed as the UK's largest Sharia-compliant investment fund — spent more than $130 million buying stakes in a string of companies linked to the Israeli military, according to analysis of the fund's holdings in the first half of 2026.

The findings were published by Middle East Eye and Hyphen and later compiled by Al Jazeera, which also cited Islamic finance experts. The investments raise questions over whether money marketed as Sharia-compliant can flow into businesses tied to Israel's military supply chain.

What is HSBC's Sharia fund?

With total assets of more than $8 billion, HSBC's Islamic Global Equity Index Fund draws savings from investors — believed to be mostly Muslims — and allocates them to global equities that have passed screening under Islamic finance principles.

The fund's website says its aim is to deliver "both investment returns and better outcomes for society at large," describing the Sharia philosophy as "ethical investments that help improve society." The fund is said to exclude businesses and financial practices deemed forbidden under Islamic law, under the oversight of an independent Sharia committee made up of two international Islamic scholars.

Under the Sharia philosophy HSBC publishes, the fund ensures "the company does not have significant revenue from non-permitted sources, such as the sale of goods or services related to … weapons."

Wahyu Jatmiko, a lecturer at the University of Southampton Business School specializing in Islamic finance, said there is "a strong basis to criticize how HSBC governs, discloses and handles investors' ethical expectations." He said: "The biggest concern is the clear tension between the restrictions the fund claims and the investments reported."

According to Jatmiko, the case is also a lesson for the entire Islamic finance industry: "The 'Sharia' label must mean something; it is tied to expectations of investing differently and to realizing the higher ethical objectives of Islamic law."

Which companies received money from the fund?

According to the analysis, HSBC bought stakes in at least five companies linked to Israel's military campaigns in the Middle East.

Palantir

HSBC spent $38.3 million on shares in Palantir Technologies, a US data analytics and artificial intelligence firm. In January 2024, Palantir announced a strategic partnership with Israel's Defense Ministry to support "war-related missions" and held a board meeting in Tel Aviv.

Palantir's software integrates large volumes of data, helping military and intelligence agencies analyze information and make operational decisions. A United Nations report in June 2025 cited "reasonable grounds" to believe the company supplies automated forecasting and targeting technology used in battlefield decisions, data processing and target-list generation, including AI systems such as "Lavender," "Gospel" and "Where's Daddy?"

RTX

HSBC's fund bought $35.7 million in RTX shares, one of the world's largest arms conglomerates. RTX owns Raytheon, a major producer of missiles, air-defense systems and military technology.

Through Raytheon, the group partners with Rafael Advanced Defense Systems (owned by the Israeli government) to manufacture components and Tamir interceptor missiles for the Iron Dome air-defense system. The two also co-developed the David's Sling missile-defense system. Raytheon also produces Tomahawk missiles and the Patriot system for the US military and supplies components for the F-series fighter jets.

Analog Devices

HSBC invested $20.3 million in Analog Devices, a US semiconductor company that has shipped components to Elbit Systems — Israel's largest private arms manufacturer. Analog Devices makes electronic components used in surveillance systems, aircraft and precision-guided weapons.

In July 2025, Irish investigative outlet The Ditch reported that subsidiary Analog Devices International shipped components from a plant in the Philippines to Elbit Systems in August, October and November 2024.

Honeywell

HSBC bought $18.9 million in Honeywell International shares, a US conglomerate that designs sensors and navigation equipment used in many types of weapons. Earlier Al Jazeera analysis found that a measurement unit on a missile used to support precise targeting in Israel's strike on the UN-run al-Sardi school in the Nuseirat refugee camp in central Gaza in June 2024 — which killed nearly 40 Palestinians, including at least 14 children and nine women — was made by Honeywell.

Rolls-Royce

HSBC invested $17.6 million in Rolls-Royce Holdings — the only British company on the list — which makes engines and propulsion systems for military aircraft and armored vehicles. Its German subsidiary MTU Aero Engine has supplied power systems for Israeli military vehicles, including Merkava tanks, Namer armored personnel carriers and Eitan armored vehicles.

In 2023, Rolls-Royce Solutions America won a US military contract to supply power units for Israel's Eitan vehicles, with later add-ons. In April 2025, the US approved a potential $180 million deal to sell additional engines for the Eitan.

Why does a Sharia fund greenlight arms companies?

Islamic finance experts explain that industry standards differ on which companies count as Sharia-compliant, and that application depends on how scholars interpret them.

Jatmiko cited the difference between S&P and Dow Jones indices in determining Sharia compliance: S&P's standard Sharia indices do not directly exclude defense businesses, while the Dow Jones Islamic Market index excludes the sector under its screening methodology.

Finance professor Muhammed Ebrahim of Durham University pointed to a "serious loophole" in the screening process: it assesses the company's reported core business activity, not the end use of its products or its customers. "A company classified as 'technology' or 'industrials' can pass the business-activity filter even if the end product sits inside a weapons system. This is exactly the problem in HSBC's case," he said.

According to Ebrahim, an investment can be technically Sharia-compliant yet ethically incompatible with Islamic principles, and "the HSBC case shows this gap starkly." He argued that the objectives of Islamic law — including protecting life and justice — are not reflected in a mechanical sector-exclusion test.

The professor proposed that screening should set thresholds for any level of involvement in weapons production or military contracts, review all indirect links and trace the end use of products. "The current system does none of these systematically. It relies on sector classification and financial ratios, not on supply-chain and end-use analysis," he said.

Both experts agreed that the Islamic finance industry is "outsourcing ethical judgment to screening providers with opaque methodologies and narrow definitions." According to Ebrahim: "Technical compliance is not the same as ethical fidelity. Funds using the Sharia label have a responsibility to ensure substance, not just form, aligns with the objectives of Islamic law."