"The Demon Lover" takes place in London during World War II. More specifically, it seems to be set during what's known as the Blitz, which was an eight-month period—between 1940 and 1941—during which the Nazis heavily bombed the city. Bombs fell for many consecutive nights, prompting many Londoners (especially those who were well-off) to flee to the countryside. This is exactly what Mrs. Drover did with her family, which is why her house has been sitting empty when she returns to at the beginning of the story.
World War II isn't the only war that has affected Mrs. Drover's life. As the story eventually makes clear, her fiancé went to the front lines in World War I—and never returned. Mrs. Drover is thus one of the many people in the 20th century to have lived through two major wars, both of which have affected her profoundly. Indeed, even though she is affluent and leads a seemingly pleasant life in London with her family, she is clearly still haunted—whether literally or figuratively—by something that happened during World War I. By setting "The Demon Lover" in Britain's most difficult period of World War II and then proceeding to tell a story that reaches back to the unhealed wounds of World War I, Bowen illustrates the unique trauma that Britons—and other Europeans—faced in the first half of the century.