In the winter of 1967-1968, Britain experienced a severe economic crisis.

Many Arab leaders were confident that Britain secretly helped the Israelis defeat their Arab neighbors in the June 1967 war in which Israel captured East Jerusalem,

 the West Bank, the Sinai Peninsula, and the Golan Heights.In response, the wealthy Gulf Arab states sold their British currency.

This led to the collapse of the pound sterling. Harold Wilson's Labor government, seeking to save money, decided it was time to end Britain's defensive colonial commitments in the Middle East.

Britain did not officially have any colonies in the Gulf region, but it was the largest foreign power in the region since the eighteenth century.