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Put water, sugar, and chopped hazelnuts (or extract) in a medium saucepan and bring mixture to a boil.
Once boiling, lower heat and let simmer for about 10 minutes, until mixture has thickened a bit. Remove from heat. If using nuts, I recommend letting the syrup rest for about 30 minutes to let the hazelnut flavor continue to steep into the syrup.
If using nuts, strain the mixture into a heat-proof bowl, leaving behind the hazelnuts (I recommend saving them for snacking or topping ice cream with!). If using extract, simply pour syrup into a heat-proof bowl or mason jar.
Keep mixture in bowl or transfer into a mason jar and place in fridge to cool completely. Syrup will continue to thicken as it cools.