There is archaeological evidence of commerce between the nexus of islands, then the heart of a territory known as Dilmun, and civilisations as far away as the Indus Valley, in what is now Pakistan.

The remains of Dilmun’s capital can still be seen at Qalaat al-Bahrain on the western outskirts of Manama, where the strata of more than 4,000 years of human settlement have been excavated beneath a later Portuguese fort. Other archaeological sites, including vast fields of burial mounds to the south of the capital, reinforce the picture of Bahrain as a major commercial and cultural centre over the millennia.

Despite its small size, Bahrain’s convoluted history has left it with a diverse, cosmopolitan culture

Bahrain became part of the Persian Empire in the 3rd century BC, and for the best part of a thousand years was controlled by a succession of Iranian dynasties. The Greeks knew the islands as Tylos, one of the primary sources of pearls in the ancient world. Until the discovery of oil in the 1930s, pearl diving remained a mainstay of the local economy – the French jewellery designer Cartier himself travelled to Bahrain to buy the precious gems.

While Bahrainis were among the first peoples of the Arab Peninsula to convert to Islam, the subsequent centuries were a time of religious and political turmoil. Initially settled by the Qarmatians (a radical Shia Ismaili sect originating in Iraq) Bahrain was later governed by a succession of Arab Sunni dynasties, a period during which many Shia Bahrainis were encouraged to move to a more quietist Imami interpretation of Islam.

From the medieval period onwards, Bahrain suffered a series of invasions that saw it controlled at various times by the Portuguese, the Persian Safavid empire and Oman. The Al-Khalifa family, a Sunni tribe originally from Kuwait, settled in the archipelago at the end of the 18th century. After gaining control from Oman, Bahrain’s new rulers entered into the first of a series of treaties with Great Britain, by then the dominant power in the Gulf. The country became a British protectorate and formally gained independence more than a century later in 1971. The Al-Khalifas rule to this day.

Despite its small size, Bahrain’s convoluted history has left it with a diverse, cosmopolitan culture at odds with many of its Arab neighbours, with an Arab Sunni elite ruling over a Shia majority, many of whom retain family and cultural ties to Iran. As the first of the Arab Gulf nations to strike oil in 1932, it was also the first to attract a significant number of expatriate workers, who make up about half of the population today. Its relatively liberal social atmosphere has made it a preferred base for many Western engineers and others commuting by causeway to the oil-rich Eastern Province of Saudi Arabia.

Bahrain was also the first Gulf oil exporter to see its production enter decline. During its heyday, Manama used its hydrocarbons wealth to build a significant refining business and establish energy-intensive industries, such as aluminium smelting. A dearth of locally produced gas has since put the expansion of the country’s metals business on hold, but Bahrain continues to receive oil by pipeline from Saudi Arabia, which it refines into high-quality fuels, lubricants and other products for export to Europe.

The outbreak of civil war in Lebanon in the 1970s provided an opportunity for Bahrain to establish itself as a banking centre for the region, a position previously occupied by Beirut. The subsequent rise of Dubai as a rival financial and expatriate hub has forced the kingdom to diversify into niche areas such as Islamic finance and insurance, but it continues to compete head-to-head with the UAE as a base for finance houses in the Gulf.

Bahrain today is a relatively stable and prosperous country, home to the Fifth Fleet of the US Navy and a member of the Gulf Cooperation Council. But the uneven distribution of wealth between Sunni and Shia communities places it on a sectarian faultline that has widened across the Middle East since the US-led invasion of Iraq in 2003. Popular opposition movements were further galvanised by the regional uprisings that began in late 2010. While Bahrain’s ruling family has engaged in a halting process of democratic reform since the 1970s, it continues to hunt for ways to square its dwindling natural resources with an increasingly discontented population that does not enjoy the same living standards as in other oil-rich Arab nations.