The Portuguese built Khasab at the beginning of the 17th century at the height of their naval presence in the region. The natural harbor gave shelter from tough seas. Unlike many forts, which were built on high ground for defensive purposes, Khasab was designed as a supply point for dates and water for Portuguese ships sailing through the strait. Today, Khasab is protected from floods by three large dams.
Access to the area by land was virtually impossible until a modern coast road was built, which allows fast access from theUnited Arab Emirates, making Khasab a popular weekend destination for people living in the Emirates. The new road also allows access to the village of Tawi, where prehistoric drawings of boats, animals and warriors can be seen in the rock face. Khasab also has a number of modern shopping areas with imported Irani goods and locally created pottery, and a few hotels, including the Khasab Hotel and Golden Tulip Hotel, which sits on a cliff overlooking the gulf.
Khasab has an interesting trading position, which hinges on its proximity to Iran. Iranians import sheep and goats into the local port, from where the animals are dispatched to the United Arab Emirates and Saudi Arabia in trucks. On their return trip to the Islamic Republic, the sailors load their boats up with electronic goods and American cigarettes, arriving in Khasab after sunrise and leave before sunset to conform with Omani immigration laws. Since the trading is illegal under Iranian law, they must avoid the Islamic Republic's coastguard as well as all other shipping in the busy waters of the Strait of Hormuz. The crossing is hazardous since the vessels, piled high either with livestock or with numerous boxes must avoid the path of the scores of oil-tankers which pass through the Strait in a transverse direction daily. Recent increases of United States sanctions against Iran have increased the amount of smuggling done through Khasab
