HSBC Islamic Fund Invested Over $130 Million in Companies Linked to Israeli Military

HSBC's Islamic Global Equity Index Fund, a UK-based Sharia-compliant investment vehicle, invested over $130 million in companies linked to the Israeli military during the first half of 2026[3][4][7][13]. This series of investments, detailed in the fund's semi-annual report, has prompted a review by HSBC Asset Management and raised questions about adherence to Islamic finance principles[1][2][4][5][6].

For many UK Muslim savers, whose pension schemes are largely invested in this fund, these revelations present an ethical dilemma[1][2][3][12]. The controversy has exposed a potential gap in how Islamic finance screens investments, particularly concerning products with military applications[2][3][4].

What the records show

An analysis of the HSBC Islamic Global Equity Index Fund's semi-annual report for the first half of 2026 revealed investments in five companies with ties to the Israeli military[1][3][5]. The fund purchased $38.3 million in Palantir Technologies, a US data surveillance firm that announced a partnership with the Israeli Ministry of Defence in January 2024 for "war-related missions"[1][4][5]. It also acquired $35.7 million in RTX, the world's second-largest arms company, known for co-producing Tamir interceptor missiles for Israel's Iron Dome and supplying components for F-series military aircraft[1][3][4][5][10]. Analog Devices received $20.3 million, with its Irish subsidiary reportedly supplying components to Elbit Systems, Israel's largest weapons manufacturer, in 2024[1][3][4][5][10]. Honeywell International, a producer of sensors and guidance devices, saw an $18.9 million investment, with one of its guidance units reportedly found in a missile strike on a Gaza school in June 2024[1][3][4][5]. Rolls-Royce Holdings, the sole British company identified, received $17.6 million, as it produces engines for Israeli Merkava tanks and other military vehicles[1][3][4][5].

What changed and for whom

Following reports by Hyphen and Middle East Eye, HSBC agreed to review the investments[1][2][5]. An HSBC spokesperson stated that the bank understood the importance of funds reflecting investor values and committed to a careful review with independent expert advisors, promising swift action[2][4]. Major UK workplace pension schemes, including Nest and The People's Pension, contacted HSBC with concerns about Palantir's inclusion in the fund[5][6]. The fund is marketed as "Sharia-compliant" to Muslim savers, many of whom hold it through halal pension schemes[3][11].

What we could not confirm

How the Sharia-compliance screening process failed to identify these military links prior to investment[3][4]. The specific timeframe for HSBC's review and when any changes to the fund's holdings will be implemented[2][4]. The process by which the independent expert advisors will assess the investments[2][4].