The result of the Jeddah talks was an Iraqi demand for $10 billion to cover the lost revenues from Rumaila; Kuwait offered $500 million. The Iraqi response was to immediately order an invasion, which started on 2 August 1990 with the bombing of Kuwait's capital, Kuwait City.
On 2 August 1990 the Iraqi Army invaded and occupied Kuwait, which was met with international condemnation and brought immediate economic sanctions against Iraq by members of the UN Security Council. Together with the UK prime minister Margaret Thatcher, who had resisted the invasion by Argentina of the Falkland Islands a decade earlier, American President George H. W. Bush deployed US forces into Saudi Arabia, and urged other countries to send their own forces to the scene.
On 3 August 1990, the Arab League passed its own resolution, which called for a solution to the conflict from within the league, and warned against outside intervention. Iraq and Libya were the only two Arab League states that opposed the resolution for Iraq to withdraw from Kuwait; the Palestine Liberation Organization (PLO) opposed it as well.
On 6 August, Resolution 661 placed economic sanctions on Iraq. Resolution 665 followed soon after, which authorized a naval blockade to enforce the sanctions. It said the "use of measures commensurate to the specific circumstances as may be necessary ... to halt all inward and outward maritime shipping in order to inspect and verify their cargoes and destinations and to ensure strict implementation of resolution 661".
Out of fear the Iraqi Army could launch an invasion of Saudi Arabia, US President George H. W. Bush quickly announced that the US would launch a "wholly defensive" mission to prevent Iraq from invading Saudi Arabia, under the codename Operation Desert Shield. The operation began on 7 August 1990, when US troops were sent to Saudi Arabia, due also to the request of its monarch, King Fahd, who had earlier called for US military assistance.
On 8 August 1990 several amendments to the federal Socialist Federal Republic of Yugoslavia (SFRY), Constitution were adopted enabling the establishment of a multi-party election system.
The Emir (Jaber Al-Ahmad Al-Jaber Al-Sabah) and key ministers were able to get out and head south along the highway for refuge in Saudi Arabia. Iraqi ground forces consolidated their control of Kuwait City, then headed south and redeployed along the Saudi border. After the decisive Iraqi victory, Saddam initially installed a puppet regime known as the "Provisional Government of Free Kuwait" before installing his cousin Ali Hassan al-Majid as Kuwait's governor on 8 August.
On 12 August 1990, Saddam "propose that all cases of occupation, and those cases that have been portrayed as occupation, in the region, be resolved simultaneously". Specifically, he called for Israel to withdraw from occupied territories in Palestine, Syria, and Lebanon, Syria to withdraw from Lebanon, and "mutual withdrawals by Iraq and Iran and arrangement for the situation in Kuwait".
On 23 August, Saddam appeared on state television with Western hostages to whom he had refused exit visas. In the video, he asks a young British boy, Stuart Lockwood, whether he is getting his milk, and goes on to say, through his interpreter, "We hope your presence as guests here will not be for too long. Your presence here, and in other places, is meant to prevent the scourge of war".