In the late eighteenth century, the al-Khalifa family invaded and captured the islands from their base in neighbouring Qatar. In order to secure Bahrain from returning to Iranian control, the Emirate entered into a treaty relationship with the United Kingdom and became a British protectorate. The population of the island at the time was estimated to be less than 10,000 persons.
Oil was discovered in 1932 and brought rapid modernization to Bahrain. Bahrain was the first place to find oil in the whole region. It also made relations with the United Kingdom closer, evidenced by the British moving more bases there. British influence would continue to grow as the country developed, culminating with the appointment of Charles Belgrave as an advisor; Belgrave established modern education systems in Bahrain.
After World War II, increasing anti-British sentiment spread throughout the Arab World and in Bahrain led to riots. The riots focused on the Jewish community which counted among its members distinguished writers and singers, accountants, engineers and middle managers working for the Oil Company, textile merchants with business all over the peninsula [Jews were not allowed to settle permanently in Saudi Arabia], and free professionals. Following the events of 1947, most of the members of Bahrain's Jewish community abandoned their properties and evacuated to Bombay and later settled in Palestine (later Israel - Tel Aviv's Pardes Chana neighborhood) and the United Kingdom. As of 2007 there were 36 Jews remaining in the country.
The issue of compensation was never settled. In 1960, the United Kingdom put Bahrain's future to international arbitration and requested that the United Nations Secretary-General take on this responsibility. In 1970, Iran laid claim to Bahrain and the other Persian Gulf islands. However, in an agreement with the United Kingdom it agreed to "not pursue" its claims on Bahrain if its other claims were realized. The following plebiscite saw Bahrainis confirm their independence from Britain and their Arab identity. Bahrain to this day remains a member of the Arab League and Gulf Cooperation Council.
The British withdrew from Bahrain on August 15, 1971, making Bahrain an independent emirate. The oil boom of the 1980s greatly benefited Bahrain, but its downturn was felt badly. However, the country had already begun to diversify its economy, and had benefited from the Lebanese civil war that began in the 1970s; Bahrain replaced Beirut as the Middle East's financial hub as Lebanon's large banking sector was driven out of the country by the war.
After the 1979 Islamic revolution in Iran, Bahraini Shī'a fundamentalists in 1981 orchestrated a failed coup attempt under the auspices of a front organization, the Islamic Front for the Liberation of Bahrain. The coup would have installed a Shī'a cleric exiled in Iran, Hujjatu l-Islām Hādī al-Mudarrisī, as supreme leader heading a theocratic government.
In 1994, a wave of rioting by disaffected Shīa Islamists was sparked by women's participation in a sporting event. The Kingdom was badly affected by sporadic violence during the mid-1990s in which over forty people were killed in violence between the government and Fundamentalists.
In March 1999, King Hamad ibn Isa al-Khalifah succeeded his father as head of state and instituted elections for parliament, gave women the right to vote, and released all political prisoners. These moves were described by Amnesty International as representing an "historic period of human rights."The country was declared a kingdom in 2002. It formerly was considered an State and officially called a "Kingdom."