The Phoenicians are believed to have had a settlement near Gibraltar and the Romans established the town of Portus Alba ("White Port") on the site of modern Algeciras.

Later peoples, notably the Moors and the Spanish, also established settlements on the shoreline during the Middle Ages and early modern period, including the heavily fortified and highly strategic port at Gibraltar, which fell to England in 1704.

During the Second World War, Italy launched human torpedoes from Algeciras on several occasions in attempts to sink British ships moored in the Gibraltar harbour, with mixed success due to the work of Commander Crabbe.

[dubious – discuss] This has caused tensions between the two sides, especially over the issue of Spanish fishermen operating in British Gibraltar territorial waters.

An incident in the area in 2007 concerning the Odyssey Marine Exploration was resolved in court cases by 2012 with Spain being awarded the ownership of the treasure-trove.

The other major draw for tourists is scuba diving: the area is rich with wrecks and historical artifacts such as crashed Avro Shackleton aircraft and Sherman tanks from the Second World War, and ancient anchors from Phoenician and Roman ships.

The area around the bay in Spain is heavily industrialised with extensive petrochemical installations near San Roque (such as the CEPSA oil refinery and Acerinox stainless steel manufacturing plant) and working ports in both Algeciras and Gibraltar.

Due to its geographical position on a major shipping route, Gibraltar is one of the largest bunkering ports in the Mediterranean, followed by neighbour Algeciras in Spain.

[14] The local CEPSA refinery produces supplies much of the fuel for bunkering in the bay which it delivers on seven dedicated barge to either Algeciras or Gibraltar.

Environmental groups have raised concerns about the risks of oil spills and other types of pollution, particularly in the light of the bay's ecological importance.