This great novel is set in 1918, which is the year in which World War I is drawing to an end. The historical context is important because it explains the anti-German feeling which has stretched across much of the world and can even be felt in Wolf Point, Montana.
The historical situation explains why people in the community distrust Karl Mueller and his family and why a group of cowboys affiliated with the so-called "patriotic" Dawson County Council of Defense shows up to torment some of the Mueller's cattle. This action is a direct attempt to intimidate Karl, who has proved to be a great neighbor to Hattie.
Hattie becomes torn between how nice, innocent people like Karl can be disliked and distrusted just because they are of German descent and her attraction to young Traft, who tries to put out why she should not be friendly with the Mueller family.
Later, as she defends another victim from persecution by Traft and his cowboy cronies, the victim makes the comment that the war has spread "far beyond the battlefield." Based on Hattie's experience, this is the absolute truth, and dealing with anti-German sentiment is a major theme in this great book.
In a nutshell, the historical situation impacted the story because many characters' lives were impacted by their own impressions of the Germans, as well as the impressions of those around them.