In the film, the chief rabbi of Damascus, a fictional character named Rabbi Bashi "Badran Farhi," wants to move the community to Palestine but the community leader named Yusuf Copper is against it, and denies that Israel is the Promised Land. So the rabbi kills a few Jews and starts rumors to incite the Muslims against the Jews.
The director says that he was looking to dramatize the roots of the conflict in the region.
The setting for the movie is interesting, as in 1840 there was a famous blood libel against the Jews of Damascus, and in 1860 Jews were falsely accused of participating with Muslims in the massacre of Christians, and 200 Jews were almost executed but were saved by outside intervention.
The episode is apparently meant to set the stage for the story of the 1860 massacre, perhaps by saying that the Jews were responsible, not Muslims.