by Luca Ruggeri

The heinous Hamas attack on Israel, with its tragic corollary of rapes and murders of innocents, will ensure that the early days of October 2023 will remain indelible in the memory of us all. The Hamas attack is currently being punctiliously analyzed in several respects, especially military and intelligence, since it was, in all evidence, carefully planned and astonished in its operational complexity, aspects that evidently surprised the Israelis.

In this context, a further aspect, certainly marginal but potentially capable of unforeseen developments, concerns the possibility that Hamas used the fact of triggering the attack, and especially the knowledge of the date of the attack itself, to trade on the stock market in order to obtain additional financial means to use for its own purposes. The topic is outlined in the paper “Trading on terror?" by two university professors, Robert J. Jackson Jr. of New York University and Joshua Mitts of Columbia University.

Until now, studies about Hamas' financing arrangements in financial markets had focused on cryptocurrencies, although no consensus position has emerged among the various authors on this issue, but the work of the two professors opens up new scenarios. In fact, the dossier documents significant anomalies in specific financial markets that have attracted the scholars' attention to the point of leading them to argue that only economic operators previously informed of the Hamas attack would have put in place the financial maneuvers they describe.

The first relevant anomaly concerns the significant amount of short, hence bearish, trading on one particular product, the MSCI Israel Exchange-Traded Fund ETF, listed on the New York Stock Exchange, which replicates the performance of a basket of Israeli companies. An ETF, in a nutshell, is a fund that aims to faithfully replicate the performance and thus the return of stock, bond or commodity indices; it is a widely used product because it allows one to take advantage of the performance of highly diversified indices, think for example of the world stock index, at a very limited cost even for ordinary savers.

Cross-referencing several parameters, the authors point out that the amount of short trades on the Israeli stock ETF appears to be completely anomalous compared to the previous 52 weeks, used as a comparison, as well as over the entire 2008-2023 period; it is not reassuring, indeed it supports the hypothesis of a trade put in place knowing of the attack, that a phenomenon of similar size occurred only in April 2023 when, according to press sources, the attack was initially planned but then postponed due to the raising of the alert level of the Israeli military.

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Other anomalies involve bearish trades on the Tel Aviv Stock Exchange as well as the apparent excessive use of options, in this case against Israeli companies listed on the U.S. exchange. Data about the parties involved in the financial transactions described above are not publicly available, so it is not possible for the two researchers to close the circle by identifying who benefited financially from the Hamas attack; there is no doubt that such an investigation will be carried out by market regulators and, we imagine, by various intelligence services.

Should the hypothesis proposed by the two professors find support we will be faced with a new dimension of hybrid warfare, potentially usable by criminal or terrorist organizations to finance themselves. Indeed, it should not be forgotten that the Israeli economy is relatively small and therefore financial maneuvers on it are relatively visible, but the mechanism is replicable, in a much less distinguishable way, on larger stock exchanges especially if the attacker wanted to operate by splitting up operations or against companies active in sectors adjacent to the one actually affected by the terrorist attack.

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Senior Fellow at the Centro Studi Machiavelli. A graduate in Economics, he worked for over twenty years at a large Italian bank and currently serves as a general manager at an institutional investor.