Bahrain, which lies off the eastern coast of Saudi Arabia, hosts the headquarters of the U.S. Fifth Fleet and Naval Forces Central Command, which would be a prime target for Iran if a new conflict erupts in the region.
Its Sheikh Issa airbase near the capital, Manama, has been equipped to handle up to 100 U.S. warplanes. Britain's air force bases several aerial tankers there.
Like many Arab states, Bahrain has discreetly contributed special security troops to the U.S.-led forces in Afghanistan.
Bahrain's security services say the 250 people arrested recently included Kuwaitis and from other gulf nationals, as well as Iranians, Yemeni and Lebanese Shiites supposedly funded by Tehran and organized into 40 to 50 cells financed by religious leaders and Islamic parties.
Some of these suspects, security sources said, had confessed to planning sabotage operations and said that other cells were working in Kuwait, where thousands of U.S. troops are based, and in Saudi Arabia.
The Al-Qabas Arabic language daily said the suspects had photographed sensitive facilities in Bahrain, possibly to help them infiltrate those sites later.
The newspaper also reported that some of these suspects had met with others from around the gulf during the recent lesser Muslim pilgrimage to Mecca known as Umrah to coordinate their activities.
Iran renounced a long-standing claim to Bahrain, which became an independent state when the British withdrew from the gulf in 1970, during the reign of Shah Mohammad Reza Pahlavi that ended in January 1979 when Islamists took power.
But Tehran still refers to Bahrain as Iran's "14th province."
The roundup of alleged Shiite opposition activists, including 10 political leaders, by Bahraini authorities in early August triggered two weeks of street protests and clashed with rival Sunnis.
Authorities said the arrests were geared toward heading off trouble during parliamentary and municipal elections scheduled for Oct. 23.
But, regional analysts say, the crackdown is likely to provoke greater unrest among the Shiites who form around 70 percent of the 700,000-strong population.
Pro-Western Bahrain, a regional financial hub, is ruled by the Sunni Al-Khalifa monarchy, and the Shiites have long felt politically and economically disadvantaged.
Minority Sunnis are widely expected to win next month's polling as electoral districts have been delineated to favor them. Despite the wave of arrests, political unrest is still likely around the elections.
The standoff between the United States and Iran over Tehran's contentious nuclear program has raised tension in the gulf to the highest level in a decade.
There are concerns Iran has established sleeper cells in all the gulf Arab states that would be unleashed to cause chaos in the region in the event of war.
In early August, Kuwait indicted several people, including a soldier and Iranian woman, on charges of spying for Iran. Tehran denied that. Other alleged Iranian agents have been reported arrested in Saudi Arabia but Riyadh has kept a lid on that.
Another potentially dangerous security wrinkle in the gulf has emerged in recent days: Sunni jihadists supposedly courted by Tehran.
The Saudi-owned Asharq al-Awsat newspaper reported Aug. 24 that "Iran today is the largest employer of Sunni movements, specifically the Salafist groups who are considered the most radical Sunnis."
Such an alliance between Shiite and Sunni, blood enemies in an Islamist schism that dates to the death of the prophet Mohammed in the seventh century, has long been deemed highly unlikely given the religious passion involved.
But the newspaper's commentary, written by Abdul Rahman Al-Rashid, its former editor in chief, claims there are hundreds of Sunni militants "hiding and being trained in Iran."
Al-Rashid echoed growing suspicions in the gulf that the Japanese supertanker M. Star, damaged July 28 under mysterious circumstances in the Strait of Hormuz, the gateway to the gulf, was struck by an al-Qaida suicide boat from Iran.
Tehran has threatened to close the strait, through which 40 percent of the world's oil supplies pass daily, if it is attacked.