How do we respond to someone who says that God created fate and has no hand in it, and uses the example of a car accident in a tunnel to support this?

Belief in divine decree (Al-Qada’ wal-Qadar) is one of the pillars of faith. It means believing that Allah has known everything eternally, and has inscribed it in the Preserved Tablet, and that His will is comprehensive, such that nothing occurs except by it, and that the actions of His servants come about by His will, and that all things happen by His power and are created by Him. This is established by both text and reason.

As for the text, it is like the saying of Allah the Almighty: "Indeed, We created all things with a [divine] decree." And reason dictates the comprehensiveness of Allah's knowledge, power, and will over everything known, willed, and decreed. Whoever believes in Allah and His attributes must believe in divine decree.

As for the example cited by the person (two cars entering a single tunnel), it is part of belief in divine decree that Allah has arranged causes to lead to their effects. So, two cars entering a tunnel that can only accommodate one is a certain cause for their collision, unless Allah wills otherwise. For Allah is capable of nullifying causes and preventing their results, as happened to Abraham, Jonah, and Khalid ibn al-Walid. He is also capable of stopping the two cars and preventing them from colliding.