Here are some extracts from Jewish historian Simon Schama's book The Story of the Jews, which was also a BBC television series. It begins with a description of how the Jews had acquired a stranglehold over Arabian trade in the centuries before Mohammed.
The force of Yotabe’s extractive grip on shipping depended on the bottleneck of the Red Sea being corked up at the other, southern end, where another populous community of Arabian Jews were settled in the port of Aden, commanding the exit out to the Indian Ocean, as well as incoming traffic from the Horn of Africa. Between Yotabe and Aden, moreover, lay a long chain of Jewish settlements and towns strung along the camel routes of the Via Odorifera, up from Yemen along the oasis-scattered periphery of the desert into the Hijaz, the north-western flank of the Arabian peninsula, and into towns like Hegra, Ula and Tabuq.
This, then, was the social geography of somewhere most people cannot imagine ever having existed: Arabia Judaica, the home of Judaised Arabs and Arabic Jews – a phenomenon that now seems to us oxymoronic, but in the two centuries before the arrival of Islam was the most natural thing in the world, flourishing both economically and culturally.
..Jewish clans and tribes whose names are known to us from early-Muslim histories owned date-palm groves and forts and were busy in the trans-Arabian camel caravans (indeed many of them followed the herds as Jewish Bedouin), and, before the appearance of Muhammad in 610, dominated fortified market towns like Tayma, where they were powerful enough to impose Judaism on the city and on any pagans or Christians who had a mind to settle there. In Khaybar, an oasis town of towers and fortified walls where there was enough water streaming from surrounding hills (stored in catchment tanks) to irrigate date palms and vines, landowning Jews specialised in making and warehousing weapons, armour, catapults and whole siege engines as well as dealing in the silks and textiles brought from the southern kingdom of Himyar.
Some of the estates of Khaybar, especially in the garden oasis of Fadak, were owned by the clan of Banu Nadir who had been among the founders of Yathrib a hundred kilometres further south, the town which grew into the most populous and powerful of all the cities of the Hijaz. There, in the place where Muhammad created his community of Believers, the Jews, at least 60 per cent of the population, were landowners, market overlords, goldmiths and silversmiths speaking and writing yahudiyya, the Jewish dialect of Arabic. But there were also kahinan, as Muslim sources call them – cohanim, the priests, some said by the Talmud to be descendants of thousands who had fled into Arabia when the Temple was destroyed, others sent as Jewish missionaries (for contrary to conventional wisdom there were many) from Tiberias and other towns of Byzantine-Roman Palestine. They were, in effect, the Cohens of Arabia. There was also a Levite community and some of the words at the heart of their faith – nabi for prophet; sadaaqa for righteous obligation, charity and justice; rahman for mercy – would pass intact into Islam. There were Arabian Jewish sailors, sculptors, scribes and poets, merchants, peasant cultivators and pastoral nomads living in tents: a complete culture. It seems natural to us to imagine the antiquity of a Christian Arab population because that community survives to this day as a coherent culture. But we have to add to that scene of the fourth to sixth centuries a Jewish Arab population – both ancient and newly converted – energetically contesting with the rival monotheism for the allegiance of pagans.
[For the sake of brevity I will skip the section where he talks about the Arab-Jewish Himyarite kingdom. I've discussed this before in the article Muhammad's Inspiration by Judaism: "It was Islam which saved the Jewish People".]
But the shattering of Jewish Himyar in 525 only sent its Judaically loyal population north into the Hijaz where they augmented an already strongly Jewish–Arab population in the towns and oases...It meant that Judaic monotheism had deeply penetrated Arabia for almost a century before Muhammad declared his revelation in 610 in one of the towns – Makka, or Mecca – in which those Himyarite emigrants had settled. It was precisely because Arabian monotheism (as distinct from the confusing three-in-one version preached by Christianity) had such a strongly Judaic colouring – was in effect Arab Judaism – that Muhammad, who had lived among Jews all his life, could assume at the very least a sympathetic hearing among them, even that they might be the most receptive of the population to his prophecy, not least the part about Islam being the true Abrahamic faith.
It is not hard to see the grounds for Muhammad’s optimism when, in 622, after his failure to win over Mecca, he made the hijra journey north to Yathrib/Medina where, as it would turn out, Islam would triumphantly prevail and create its first governing institutions. It may be that the Jewish clans in Yathrib – and there were many of them – were no longer politically and socially dominant in the city, but there is equally no doubt that they were still there in both economic and cultural force. Islam, then, was born in a Jewish urban crucible. Muhammad’s belief that the Jews would be his most natural allies is explained by an affinity between the two one-God religions. But the connection is even stronger than that. Himyarite-Arabic Judaism may have been, in a deep sense, the direct parent of Islam, for it makes no sense historically to classify Muhammad’s core doctrines as anything but essentially Judaic – evident in the indivisibility of the one unseen omnipotent God (referred to in Himyarite and Arabian Judaism, after all, as ‘rahman, the all-merciful and compassionate who art in heaven and earth’); the coming of the Last Days (a central belief of the Qumran community); the hatred of idolatry; the righteous commandment of charity (sadaaqa in Arabic, tzedaka in Hebrew); the strict prohibition not only against pork but also against consuming meat with its living blood still in the flesh; the insistence on ritual washing and purification, especially before prayer. It is no surprise, therefore, that until his stinging repudiation by the Jewish clans of Yathrib, Muhammad commanded the Believers to pray in the direction of Jerusalem, not least because he thought of himself firmly in the succession of the biblical prophets. Other of his strictures – multiple daily prayers (also required by Zoroastrianism); ritual purifications; a fast on the tenth day of Tishri (the Jewish Day of Atonement), only later replaced by Ramadan, as well as weekly fasts on Mondays and Thursdays; the obligation of circumcision – were all standard Jewish practice.
The Story of the Jews: Finding the Words (1000 BCE – 1492) by Simon Schama
For more on the connections between Jews and Islam, see the linked articles at the bottom of this page: The Jew as Ally of the Muslim.