It's not quite based on nothing: there is footage of Hamas (or maybe Islamic Jihad?) digging up pipes to use for rockets and a Guardian article saying that Hamas could use the EU-financed pipes to make rockets, but as far as I can tell there isn't any evidence that the pipes Hamas are using are from critical in-use infrastructure.
One reddit commenter posted that the video of the pipe being dug up was to supply an abandoned Israeli settlement. Israel shut that water off a long time ago. I can't verify that's correct, but it sounds plausible.