On observation screens in the Gaza Division, reality appears in higher resolution and with more complexity than ever. The Israel Defense Forces’ massive investment in advanced observation and scanning systems has made the area between Israeli communities and deep into Gaza clearer than before, yet it also makes it more challenging to understand what lies behind the images.
While the observers stay alert for any infiltration attempts or fire toward the border, they also provide a glimpse into what is called “the red zone.” Far from the IDF’s tanks, bulldozers, and other operational missions, one of the most Sisyphean yet simplest tasks is conducted: monitoring the daily routines of the Palestinian population.
Vendors transport goods, people walk along streets without sidewalks, and children play as plastic bags drift over mountains of trash in the background. From this scene, Hamas operatives must also be identified, blending into the civilian population, having recently established checkpoints deep in the territory and on main roads across just over 40% of Hamas-controlled areas.
One checkpoint is located in the southern Gaza Strip, near a barrier and close to the Mourg axis in the Al-Muasi area, part of which is designated as a humanitarian zone. According to Southern Command military sources, Hamas representatives, seeking to minimize identifiable markers, collect roughly 30% tax on various products from all merchants.
This vast revenue forms the base for Hamas’s money machine, enabling the organization to strengthen and rebuild in the territory it controls. This is before considering the fuel tax from Egypt and cigarette taxes, which security veterans describe as “huge.”
Analysis within the security system shows that Hamas’s budget relies on external aid from various countries, primarily Iran, and fundraising abroad using methods that are often difficult to detect, alongside taxes and fees collected in the Strip by terror operatives, all consolidated into a single treasury.
Intelligence collection and research further reveal that while Hamas skillfully maneuvers between its various funding sources - the movement, the government, the military wing, and other security bodies - the allocation of resources appears relatively clear. External aid flows almost exclusively to strengthen the military wing and fortify the movement’s structure, while the burden of civil and governmental management relies on local tax collection from merchants.
Hamas funded by Gaza taxes, aid
The implication is straightforward: taxes collected from residents fund the government, while money from abroad is dedicated to building military power and consolidating Hamas’s rule, which Israel seeks to weaken and eventually replace in preparation for the next war.
Hamas’s revenue model has dynamically adapted to the realities of war, or, in this case, to which trucks can be taxed. According to a security source, the organization focuses its collection efforts on the private market while keeping a safe distance from international aid trucks.
“This is a public relations game," said the source. "While Israel allows unprecedented quantities of goods to enter Gaza, filling warehouses since the start of the relatively fragile ceasefire, Hamas, led by Izz al-Din al-Hadid, has lowered its profile toward aid organizations to avoid international criticism and continues funding its operations through tax checkpoints and merchants’ pockets, with all sides aware that southern Israel remains on a collision course toward renewed fighting as long as Hamas refuses to disarm.”
Security research shows that, given its absolute control over the Strip, Hamas has established an elaborate, well-oiled, multi-stage revenue collection system with multiple methods. According to informed sources, under direct taxation, Hamas checks and registers trucks entering the Strip to collect 15%-30% tax from merchants after goods are moved to additional warehouses.
Hamas’s control over Gaza’s market extends beyond customs and official taxation. Research shows the organization has developed a well-oiled system of coercive mediation over products defined by Palestinians on social media as scarce. The method is simple and brutal: private merchants must hand their goods to Hamas-affiliated traders, who resell them at inflated prices. The profit flows to Hamas through a dedicated tax on the difference between purchase and resale prices in the black market.
Beyond official taxation, Hamas operates a sprawling network of gray and creative revenue streams, exploiting every loophole in Gaza’s fragile but functioning economy. This begins with smuggling, which serves a dual purpose: enabling military buildup and introducing prohibited goods, on which the organization imposes especially high “luxury taxes.”
Control is reinforced through strict fees and fines, enforced with violence in case of refusal or resistance. Payments are required for trade permits, business licenses, and street stalls, with non-compliant merchants risking, at best, confiscation of goods or closure of their business.
Fuel intended for hospitals is diverted to generators
Perhaps the most concerning finding concerns the exploitation of humanitarian systems: evidence shows that fuel intended for hospitals is diverted to generators, which are then sold at full price to residents in nearby neighborhoods. International aid thus becomes just another commodity in Hamas’s financial system.
Sources noted that, beyond direct collection from stall owners, Hamas has cracked the system used to funnel foreign capital under the radar. The more active and vibrant the private market in the Strip, as reflected in IDF observations, the greater Hamas’s ability to inject funds through an offset mechanism: money intended for Hamas abroad is used to purchase goods sent to the Strip, sold in the local market, and converted into cash in the hands of the organization’s finance operatives.
This creates a financial system that bypasses Israeli-American sanctions, ensuring that even amid a crisis, Hamas’s security mechanisms, primarily its military wing, are well-funded.
This is not the only concern for Israel’s security system and political leadership. Hamas exploited the ceasefire and the extended Phase A, during which it was supposed to disarm and transfer control of the Strip to a third party, and succeeded in deepening its governance and improving its economic position.
Sources familiar with Gaza’s governance report that Hamas strengthened public order enforcement through armed, masked operatives in the streets and night arrest units, suppressing opposing elements. At the same time, it expanded public services by reinforcing government offices and local authorities, alongside the gradual rehabilitation of civil systems, including medical facilities.
Sources added that Hamas continually invests in improving relations with residents through gestures such as cash grants and by leveraging local power brokers for media impact. According to IDF estimates, public criticism of Hamas is currently sporadic and does not threaten its rule.
A senior security official described another layer behind the scenes, noting that the mediation process for implementing US President Donald Trump’s plan and the Board of Peace is faltering due to Hamas’s calculated, cold strategy. While projecting a willingness to hand over Gaza’s keys and transfer governance, the organization embeds its civil officials on the technocratic committee, ensuring they are paid and reducing its own financial burden.
The security official also said that while negotiations appear ongoing, Hamas has made clear it has no intention to surrender weapons or disarm.
“If Israel has not yet dismantled Hamas and taken control of Gaza, it will not succeed in the future, and all that remains is to hold on, strengthen, and prepare for war with the IDF," said the official. "But there is another important point: the Palestinian public is fed up with war and wants peace, and Hamas fears that if fighting resumes, the public will criticize it, including from central movement circles.”
Therefore, Hamas projects compliant smiles toward the international community and US mediators, including Nikolay Mladenov, who is making major efforts to find a breakthrough in negotiations and will soon initiate new mediation talks.
Hamas, according to a source familiar with mediation details, does not publicly oppose disarming the Strip but seeks to neutralize it through conditions like Israeli withdrawal, adherence to aid truck volumes, or partial frameworks (partial disarmament, simultaneous start of rehabilitation).
Additionally, Hamas leadership uses targeted neutralization, as in the case of Khamzeh, son of Khalil al-Hayya, who was in the wrong place at the wrong time when the IDF neutralized a senior Hamas operative, alleging Israel violated the ceasefire terms.
Hamas also told the public that it insists on retaining weapons until a mutually agreed solution to protect the population from what it calls "Israeli aggression" and armed militias, causing injuries and deaths almost weekly.
“Hamas has established over 100 new learning spaces with UN assistance,” a security source said, “and even held a ‘Palestine marathon’ a few days ago in Gaza with a few thousand participants.”