Sharia fund's $133m went to five firms tied to Israel's military, raising questions for HSBC

The UK's largest Islamic Sharia-compliant investment fund has spent more than $130 million buying shares in companies linked to the Israeli military. The investments by HSBC's Islamic Global Equity Index Fund have raised major questions about their ethics.

According to Al Jazeera's reporting, in the first six months of 2026 the fund bought shares in Palantir, RTX, Analog Devices, Honeywell and Rolls-Royce. The total invested in the five companies was $133.5 million.

The disclosure comes while, the report notes, Israel is carrying out a genocide in Gaza, attacking and oppressing Palestinians in the occupied West Bank and occupying southern Lebanon. Middle East Eye and Hyphen first published the investment details.

HSBC's Islamic Global Equity Index Fund holds more than $8 billion in assets. It invests clients' money in global stock markets, and most of its investors are believed to be Muslim. The bank's website says the fund aims not only for profit but also for good outcomes for society as a whole; HSBC describes its Islamic investment philosophy as ethical investing that improves society.

Under the fund's rules, businesses and financial activities prohibited under Islamic principles are supposed to be avoided. An independent Islamic committee, including two internationally recognised Muslim scholars, oversees Sharia compliance. HSBC's own policy says a significant share of a company's income must not come from prohibited sources — which include selling weapons-related products and services.

So how did companies directly or indirectly tied to weapons and military equipment pass that screening? That is now the central question. Experts in Islamic finance say checking a company's main line of business is not enough; where its products are used, and for what purpose, must also be considered.

The fund invested $38.3 million in Palantir. The US data analytics and AI company's software can process vast amounts of data, and military and intelligence agencies use it in operational decisions. In January 2024 Palantir announced a strategic partnership with Israel's defence ministry to support 'war-related missions', and its board met in Tel Aviv in a show of solidarity.

A UN report published in June 2025 said Palantir increased its support to the Israeli military after the Gaza war began, and that there were 'reasonable grounds' to believe it supplied automated predictive policing technology allegedly used for automated decisions, data processing and target-list generation on the battlefield.

The investment in RTX Corporation was $35.7 million. The US defence manufacturer's subsidiary Raytheon builds missiles and air defence systems. Raytheon partners with Israel's state-owned Rafael to make components for the Iron Dome and its Tamir interceptor missiles, and jointly produces the David's Sling defence system. Raytheon also builds Tomahawk and Patriot missiles for the US military.

The fund put $23 million into semiconductor company Analog Devices, whose electronic components are used in surveillance systems, aircraft and precision weapons. Reports say Analog Devices supplied components to Elbit Systems, Israel's largest private arms maker, during the Gaza assault. In July 2025 the Irish investigative outlet The Ditch reported that the company's Irish-registered subsidiary shipped components to Elbit from a Philippines factory in August, October and November 2024.

Honeywell International received $18.9 million. The company is involved in sensors, measurement devices and targeting technology used in military weapons. According to a 2024 Al Jazeera analysis, a measurement unit made by Honeywell was part of the missile used in the June 2024 Israeli strike on the UN-run Al-Sardi school in Gaza's Nuseirat refugee camp, which killed about 40 Palestinians, including at least 14 children and nine women.

Rolls-Royce Holdings, the only British firm among the five, received $17.6 million. Taken together, the picture is clear: money from a fund marketed as Sharia-compliant reached companies whose products and technology are tied in various ways to Israeli military activity.

What remains to be seen is what explanation HSBC and its Islamic committee offer for these holdings, and whether the Sharia screening method changes. The trust of Muslim investors sits at the centre of the controversy.