Politicians in Norway have rejected calls to stop investing its sovereign wealth fund – the largest in the world – in the occupied Palestinian territories despite emotional scenes inside and outside parliament.

The £1.4tn oil fund, which is run byNorges Bank according to rules set by MPs, is the largest European investor in Israel’s occupation.

Among the 45 proposals voted on in Wednesday’s annual review of the oil fund – several of which related to Israel – was to instruct Norges Bank to divest the oil fund from companies that contribute to Israel’s illegal occupation and what the proposals said were Israeli war crimes.

The vote came after dramatic scenes in Stortinget (parliament) in Oslo as several MPs gave speeches about Gaza through tears. One politician, Marian Hussein, was asked by the speaker to remove her keffiyeh, which she kept on in protest. During the debate, sounds of shouting protesters outside echoed in the chamber.

Hussein, the deputy leader of the Socialist Left party, which brought forward one of the proposals, said in response: “Speaker, I will not take off my Palestinian scarf. Those standing outside are shouting right now: ‘Stop Norwegian involvement, withdraw the oil fund.’”

She added: “Why do we still show double standards in this hall? Why are some people worth less than others?”

After quoting from a famous Norwegian poem, Du Må Ikke Sove (Dare Not Sleep) from 1936, she cited Jens Stoltenberg, the former Nato secretary general who is now the finance minister in Norway’s minority Labour government.

“We are a small nation which constantly talks about the need for a world order,” she said. “We have a finance minister who has been a former Nato chief and prime minister. He knows very well what this means in foreign policy.”

During the debate, Stoltenberg said Norway had “an established ethical regime for the fund”. He added: “We divest from the companies that contribute to Israel’s breach of international law, but we do not divest from all companies that are present on the ground.”

After the vote, Hussein told the Guardian: “I’m incredibly disappointed. This should have been the easiest vote of our lives, especially for the Labour party and the Labour government.”

She added: “We are not backing down. Shortly before the government recognised the state of Palestine, they voted against it in parliament. We will continue to put pressure on the other parties together with the massive movement in civil society.”

Before the afternoon vote, crowds gathered outside parliament for a protest organised by several organisations including the Palestinian Committee, the Action Group for Palestine and Amnesty International Norway.

Norway has played a historical role in the region, including by facilitating the Oslo peace accords between Israel and the Palestinians that led to a breakthrough deal in 1993. Last year it recognised the Palestinian state, one of a minority of European countries to do so.

Last week, Norway’s international development minister, Åsmund Aukrust, told the Guardian that Israel was setting a dangerous precedent for international human rights law violations in Gaza that was making the world more dangerous.

Line Khateeb, the leader of the Palestine Committee of Norway, said the vote was an opportunity for politicians “to show that international law matters and that they do not want to make Norway complicit in the Israeli genocide and colonisation”.

Stoltenberg, she said, “needs to take responsibility” and she called on the oil fund to divest from Israel as it had done from all Russian companies immediately after the invasion of Ukraine. She added: “Even though the Norwegian oil fund is Europe’s largest investor in the Israeli occupation, Stoltenberg claims that the current guidelines are good enough. That is appalling and needs to change.”

The discovery of one of the world’s largest offshore oilfields off the Norwegian coast in 1969 and the huge revenue that came from selling it dramatically changed Norway’s prospects, bringing rapid economic growth.

Norway’s oil fund, officially called the Government Pension Fund Global, was established in 1990 to preserve revenues for future generations in the knowledge that the oil supply will one day run out. The first deposit was made to the fund in 1996 and since then it has been invested only outside Norway.