This research employs a historical-analytical approach to examine the process of formation and institutionalization of commodity smuggling networks in the northern ports of the Persian Gulf during the first half of the twentieth century. Drawing on archival documents, consular reports, and the period press, the findings reveal that the interaction of three factors—the central government’s fiscal policies, the region’s socio-economic livelihood structures, and the targeted interventions of foreign powers (particularly Britain)—led to the emergence of an organized network for the smuggling of strategic commodities. Within the framework of Wallerstein’s World-Systems Theory, this phenomenon reflects Iran’s semi-peripheral position and the structural pressures exerted by the global core upon the periphery. Its consequences extended beyond economic loss to include the weakening of national sovereignty, the transfer of capital to the southern sheikhdoms of the Persian Gulf, the formation of transnational networks, and transformations in the region’s socio-political structure. This study interprets smuggling not merely as an economic problem, but as a socio-political phenomenon that reflects power dynamics along the frontiers of the Islamic world, offering insight into the formation of unequal relations as well as the capacities for agency within local communities in the peripheral regions of the Islamic world.