The earliest settlements in Oman, as in the Arabian peninsula generally, date from some time in the 3rd millenium BC. Though at that time and for some hundreds of years more, Oman was on the edge of the trade routes (pictured) linking ancient Mesopotamia to the Indus Valley, it does not appear to have profited a great deal from its location. Some centuries later, however, an area of what is now Oman became of paramount importance to the ancient world.

The southernmost region of Oman, modern Dhofar, was responsible for the area's importance. For it is one of the few spots in the world where frankincense trees grow. Frankincense is an aromatic gum from certain species of trees which grow only in southern Oman, the Wadi Hadhramaut in Yemen, and Somalia.

The incense burns well because of its natural oil content and in addition, it has medicinal uses. These two factors plus its relative scarcity made it an extremely sought after substance in the ancient world. (The gifts of the Magi to the Christ Child were gold, frankincense and myrrh. At the time, the gold was far less valuable than the other two.)

Frankincense was vital to the religious rites of almost every civilization in the ancient world. The great temples of Egypt, the Near East and Rome itself were all major consumers of the scarce commodity. Not to mention the thousands of other temples found in every city, town and village. Or the medical practitioners themselves. Indeed, the writer Pliny in the first century AD claimed that control of the frankincense trade had made the south Arabians the richest people on earth.

In the second century AD at the height of the trade, some 3000 tons of frankincense were transported each year by ship from south Arabia to the Greece, Rome and the Mediterranean world. The centre of the trade was in a place now called Khor Rouri which the Greeks called Moscha. Though the trade went into a decline after the 3rd century AD, it still managed to keep south Arabia relatively wealthy for another three centuries.

During the 18th and 19th centuries the sultans of Muscat were often powerful figures in Arabia and East Africa, and often came into conflict with the colonial powers in the region, particularly the Portuguese, who first settled in the 16th century in an attempt to protect their eastern trade routes. Close ties have been maintained with Britain since 1798, when a treaty of friendship was concluded. The country was known as Muscat and Oman until 1970. British influence remains strong, but the number of British advisers occupying key positions in Omani government departments is diminishing. Foreign policy in the last 15 years has been dominated by the often poor relations between Oman and the neighbouring former Yemen PDR, which was alleged to have supported the unsuccessful insurgency waged by the Popular Front for the Liberation of Oman during the 1960s and 1970s. More recently, friendly relations have been established with Yemen – including the settling of a long-running border dispute dating from before Yemeni unification. Oman’s strategic importance has been underlined by both the Gulf War between Iran and Iraq and, in late 1990, by the Gulf crisis following the Iraqi invasion of Kuwait. Oman was used as a staging post for US and UK ships and aircraft arriving in the area as part of the multi-national force confronting the Iraqis. The country was a founder member of the Gulf Co-operation Council in 1981 and has played a leading role in promoting its increasing involvement in regional security issues. In 1994, Oman was the first Gulf state to establish official relations with Israel.