We know that the during the Bronze Age many Mediterranean civilizations collapsed. These collapses were somewhat concurrent (to my understanding) with natural disaster and the rise of the "sea people's". What is the current state of our understanding of this event? As a follow up- My classics teacher once informed us that writers in the following centuries attributed the construction of great structures (in this case Minoan buildings) to mythological beings such as Cyclops. Is there any truth in this?
The latter half your question--yes Greeks in the Archaic Age attributed Mycenaean works to cyclops, it's where we get the term "cyclopean".
The first half is more nuanced. Every academic is going to be critical and there is not one single cause for the collapse. A main factor seems to be climate change which may have caused a disruption in the economy and the trade in copper and tin.
The Ancient eastern Mediterranean and near east was remarkably connected, and to a degree uniform in culture. An issue in say...egypt, would eventually spread to affect Mesopotamia and Greece. This is where economic factors come into play.
Another cause--or perhaps a response to the collapse--is the Sea People. We don't know who they are, but if you were to read the names of tribes listed by Egypt and the hittites they sound somewhat similar to the names of Greek states at the time. One academic argument is that the people started in Sicily and that region and then migrated to Greece. Greece was burned out and the Greeks went with the raiders into the near east. In short--the sea people could largely have been Greeks.
Greek myth from the era certainly tell of invasions, so perhaps there is some truth to this.
For more info I'd recommend you check my main source for the above info which is 1177 The Year Civilization Collapsed by E. Cline, an archaeologist and historian of the period. Keep in mind more info is constantly coming out as we continue to excavate and translate. Happy reading!
Follow up question, is there any speculation on the collapse of the Bronze age being related to the return of the Heracleidae or the Doric Invasion?