In the early 20th century, Kuwait immensely declined in regional economic importance,[62] mainly due to many trade blockades and the world economic depression.[70] Before Mary Bruins Allison visited Kuwait in 1934, Kuwait lost its prominence in long distance trade.[62] During World War I, the British Empire imposed a trade blockade against Kuwait because Kuwait's ruler supported the Ottoman Empire.[70][71][72] The British economic blockade heavily damaged Kuwait's economy.[72]
The Great Depression negatively impacted Kuwait's economy starting in the late 1920s.[73] International trading was one of Kuwait's main sources of income before oil.[73] Kuwaiti merchants were mostly intermediary merchants.[73] As a result of European decline of demand for goods from India and Africa, the economy of Kuwait suffered. The decline in international trade resulted in an increase in gold smuggling by Kuwaiti ships to India.[73] Some Kuwaiti merchant families became rich due to gold smuggling to India.[74]
Kuwait's pearling industry also collapsed as a result of the worldwide economic depression.[74] At its height, Kuwait's pearling industry led the world's luxury market, regularly sending out between 750 and 800 ship vessels to meet the European elite's need for luxuries pearls.[74] During the economic depression, luxuries like pearls were in little demand.[74] The Japanese invention of cultured pearls also contributed to the collapse of Kuwait's pearling industry.[74]
Following the Kuwait–Najd War of 1919-1920, Ibn Saud imposed a tight trade blockade against Kuwait from the years 1923 until 1937.[70][73] The goal of the Saudi economic and military attacks on Kuwait was to annex as much of Kuwait's territory as possible.[70] At the Uqair conference in 1922, the boundaries of Kuwait and Najd were set.[70] Kuwait had no representative at the Uqair conference.[70] Ibn Saud persuaded Sir Percy Cox to give him two-thirds of Kuwait's territory.[70] More than half of Kuwait was lost due to Uqair.[70] After the Uqair conference, Kuwait was still subjected to a Saudi economic blockade and intermittent Saudi raiding.[70]
In 1937, Freya Stark wrote about the extent of poverty in Kuwait at the time:[73]