structural:summarization, structural:reformatting
1981–1991: Wars and terrorism

The Al Sabah strongly advocated Islamism throughout the 1980s. At that time, the most serious threat to the continuity of Al Sabah came from home-grown democrats, who were protesting the 1976 suspension of the parliament. The Al Sabah were attracted to Islamists preaching the virtues of a hierarchical order that included loyalty to the Kuwaiti monarchy. In 1981, the Kuwaiti government gerrymandered electoral districts in favour of the Islamists. Islamists were the government's main allies, hence Islamists were able to dominate state agencies, such as the government ministries.

During the Iran–Iraq War, Kuwait ardently supported Iraq. As a result, there were various pro-Iran terror attacks across Kuwait, including the 1983 bombings, the attempted assassination of Emir Jaber in May 1985, the 1985 Kuwait City bombings, and the hijacking of several Kuwait Airways planes. Kuwait's economy and scientific research sector significantly suffered due to the pro-Iran terror attacks.

Simultaneously, Kuwait experienced a major economic crisis after the Souk Al-Manakh stock market crash and decrease in oil price.

After the Iran–Iraq War ended, Kuwait declined an Iraqi request to forgive its US$65 billion debt. An economic rivalry between the two countries ensued after Kuwait increased its oil production by 40 percent. Tensions between the two countries increased further in July 1990, after Iraq complained to OPEC claiming that Kuwait was stealing its oil from a field near the border by slant drilling of the Rumaila field.

In August 1990, Iraqi forces invaded and annexed Kuwait without any warning. After a series of failed diplomatic negotiations, the United States led a coalition to remove the Iraqi forces from Kuwait, in what became known as the Gulf War. On 26 February 1991, in phase of code-named Operation Desert Storm, the coalition succeeded in driving out the Iraqi forces. As they retreated, Iraqi forces carried out a scorched earth policy by setting oil wells on fire.

During the Iraqi occupation, nearly 1,000 civilians were killed in Kuwait. In addition, 600 people went missing during Iraq's occupation; remains of approximately 375 were found in mass graves in Iraq. Kuwait celebrates February 26 as Liberation Day. The event marked the country as the centre of the last major war in the 20th century.