Does the eighth hadith in Imam al-Nawawi's Forty Hadith teach Muslims to fight all people until they embrace Islam?

Summary

The Office of the Mufti of the Federal Territories explains that this eighth hadith is often targeted by claims that Islam is an extremist religion. It states that such a reading is mistaken because a hadith cannot be understood only literally or by reason alone. Proper understanding requires tools such as hadith sciences, commentary, the occasion of the hadith's utterance, Arabic language, and reading it together with Quranic verses and other hadiths on jihad. The mistaken reading is said to lead to extremist and radical thinking.

Written in our own words from the original fatwa — check the source before acting on it.