Iolaire began life in 1881 as a private steam yacht for a Holland Park gentleman, the first of half a dozen wealthy owners over four decades. Mortimer Singer of the sewing-machine family owned her for a while. So did the founder of the Castle Mail Packet Company, then the fifth Duke of Montrose, who renamed her Mione after his wife. The Horlicks proprietor owned her next. By the First World War she belonged to a baronet of Vaynol Park in Caernarfonshire, who had named her Amalthaea after a Greek nymph. The Admiralty requisitioned her in 1915, bolted on two three-inch guns, and sent her to Great Yarmouth for anti-submarine patrol work. In November 1918, weeks after the Armistice, she was transferred to Stornoway. She was a small ship, beautifully built for pleasure cruising, never designed to carry three hundred men in a winter gale. On New Year's Eve she had about half her usual crew aboard. The rest were on Christmas leave.

Iolaire reached Kyle of Lochalsh around four in the afternoon. The two trains from the south arrived an hour or two later. Sources differ on the exact numbers, but somewhere between 260 and 290 men crowded onto Iolaire alongside her crew. About thirty went on Sheila. By every account Iolaire was overloaded. She had only enough lifebelts and lifejackets for a fraction of those aboard. She sailed at about seven thirty that night. The Minch was rough but not unmanageable for an experienced crew. Lieutenant Cotter, in command, set a course for Stornoway. Around two in the morning, navigating in darkness off the Eye Peninsula, the yacht struck the Beasts of Holm. Distress signals went up: the steam whistle, flares from Commander Mason. The harbour was perhaps a mile distant. The lights of Stornoway were visible. There was almost no help that could reach them in time.

What followed was a long, freezing chaos in which most of what could go wrong did. The yacht began breaking up against the rocks. Men were swept overboard. Many could not swim. Few had lifejackets that fit. A handful made the rocks by clinging to debris or to each other. One sailor, John Macleod of Ness, managed to swim ashore through breaking surf carrying a heaving line. From shore he hauled across a heavier hawser. Some men, perhaps forty, reached land along that rope. He reached land himself around half past two in the morning. Lieutenant Cotter, whose navigational error had put the yacht on the rocks, was among the dead. So was the helmsman who had taken over the wheel at one o'clock and was still there when she struck. Of those aboard, somewhere around two hundred and one died. Seventy-nine survived. The bodies of fifty-six of the dead were never found.

There is no way to write the scale of this disaster on a single island. Lewis had been sending its young men to the Royal Navy and the Royal Naval Reserve in disproportionate numbers throughout the war. Iolaire took back from them, in a single night, men who had already given four years. Almost every village on Lewis and Harris lost someone. Mothers waiting at the pier in Stornoway to meet their sons saw bodies washed up instead. Less than two weeks after the disaster the Admiralty tried to sell the wreck while eighty of the bodies were still in the sea. Rear Admiral Boyle had to write to London to tell them that islanders resented the wreck being sold while their dead remained unrecovered, and the sale was withdrawn. A relief fund was raised at a benefit concert in the Usher Hall in Edinburgh and through public collections at cinemas in Edinburgh and Glasgow. In 1919 alone it raised twenty-six thousand pounds. It paid relief to 201 bereaved families. The last payment went out in January 1938, when the youngest child of the last man killed reached the age of eighteen.

A small granite obelisk was erected at Holm in 1958 or 1960, the exact year uncertain. Its inscription, in Gaelic and English, includes Psalm 77 verse 19: "Thy way is in the sea, and thy path in the great waters, and thy footsteps are not known." The names of the dead are also carved into the war memorials of their home parishes, sometimes on a separate Iolaire list at places like Carloway, Crossbost, and Garrabost. In March 2018 schoolchildren from the Nicolson Institute collected 201 stones, one from each home parish of the men, and built them into a cairn beside Stornoway Town Hall. That November the Woodland Trust planted 201 trees at Laxdale, an avenue of birch and rowan and hazel leading to the Lewis War Memorial tower. On New Year's Day 2019 a centenary service was held on Lewis, the First Minister of Scotland and the Duke of Rothesay laying wreaths at Holm. The Duke unveiled a bronze sculpture of the two ropes John Macleod used: the heaving line he swam with, the hawser beneath it. In the harbour Malcolm Maclean's sculpture Sheol an Iolaire traces a life-size outline of the yacht in 280 posts. At night, 201 of them glow blue for the dead and 79 glow red for the survivors. Since 2 September 2019 the wreck on the Beasts of Holm has been a protected war grave.