Why does Bahrain matter? Channel 4 News International Editor Lindsey Hilsum explains why the future of the small state could have big implications for the Middle East and the world.

The 'small' kingdom of Bahrain has a 'big' role to play (Reuters)

Bahrain may be small, but it matters, not just to the people who live there but to neighbouring Gulf countries and to the USA.

The US Fifth fleet is based at Juffair, near the capital, Manama, with command and control of all US naval vessels operating in Middle Eastern waters. It's an integral part of US military strategy in the Middle East.

And then there's the Saudis, watching and waiting across the border. Many, probably the majority, of demonstrators in Bahrain, are Shi'a Muslims. They make up the majority of the population, probably outnumbering Sunnis two to one. Yet the Royal family is Sunni, and Shi'as face discrimination. They're not trusted to defend the country, for fear they might be close to Shi'a Iran, so the government drafts in Pakistanis and other Sunnis to serve in the army - a cause of huge resentment.

The empowerment of the Shi'a community in Bahrain is likely to worry Saudi Arabia.

The protests are backed by leading opposition Shi'a bloc Welfaq who hold 17 seats out of 40 in the Bahraini Government. They are now threatening to leave the assembly over the recent protests. The Shi'a protesters are demanding a democratic constitution. The empowerment of the Shi'a community in Bahrain is likely to worry Saudi Arabia.

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Bahrainis say "Here the Shi'a have problems. In Saudi they're slaves." In Saudi, the Shi'a minority is regarded by many Sunni imams as heretics. The Saudi regime will see this uprising in Bahrain as a threat to their own stability, fearing that Shi'as in Saudi may be emboldened.

Bahrain is not a huge oil exporter, but the unrest there combined with continuing demonstrations in Libya and Iran, more significant producers, has pushed Brent crude to a two-and-a-half year high of more than US$104.

The unrest has pushed Brent crude to a two-and-a-half year high of more than US$104.

This is not the only financial effect caused by the protests, Bahrain is used as a major banking, trade and islamic finance centre and $10bn dollars of mutual funds are held within the kingdom.

The ferocity with which the security forces broke up the demonstrations on Thursday shows just how determined the authorities are to quell unrest. Yet Bahrain's youth have watched their counterparts in Egypt and Tunisia keep going despite repression and state violence.