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The escalating diplomatic row between Saudi Arabia and Iran is expected to heighten tensions in the Middle East and raise the risk of proxy wars throughout the region.
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Thousands across Iraq protest the Saudi execution of a prominent Shi'ite cleric and at least two Sunni Muslim mosques are attacked south of Baghdad in an apparent retaliation for the killing.
The political discord is also likely to benefit Islamic State, which aims to emphasise religious divisions in the Muslim world, IHS Country Risk analysts Firas Abi Ali and Anna Boyd say.
The diplomatic strain comes after Saudi Arabia executed Shiite cleric Nimr al-Nimr last week, drawing an angry rebuke from Iran, its regional competitor for power.
The Saudi embassy and a consulate in Iran have been targeted by protesters.
In response, Sunni majority Saudi Arabia has cut diplomatic ties with Iran, prompting fellow Sunni-led nations like Bahrain, United Arab Emirates and Sudan to take similar action.
Kuwait recalled its ambassador to Iran on Wednesday, while Iranian President Hassan Rouhani has criticised Saudi Arabia's execution of the cleric.
"These conflicts are likely to escalate, given that Saudi accusations against Iran will serve to close off diplomatic avenues," Mr Abi Ali wrote. "The growing sectarian polarisation across the region will primarily benefit Islamic State, which is promoting a sectarian narrative."
Iran objects to Saudi funding of anti-government militants in Syria, while Saudi Arabia opposes Iranian support for rebels in Yemen on the Arabian peninsula.
Citi political risk analyst Tina Fordham said the diplomatic flare-up might trigger "actions by regional proxies" which remained "a wild card factor" in the months ahead.
Saudi Arabia, through the United Nations, has given assurances it still plans to participate in Syrian peace talks that involve Iran.
However, a multilateral resolution to the conflict looks less likely.
The near five-year civil war in Syria has displaced 12 million people while attracting about 20,000 militants from far beyond the region, including Australia.
And the risks from an Iran-Saudi Arabia proxy war are not contained to the region. The Syria-spurred refugee crisis helped propel 1 million asylum seekers, migrants and economic migrants into Europe last year, reshaping politics in the area.
Whatever Iran and Saudi Arabia said, the future of UN-sponsored Syrian peace talks relied "more on global powers, from Washington to Moscow, working together to bridge regional differences", Fordham said.
However, more is at stake for Iran and Saudi Arabia than peace in Syria.
After the signing of a 2015 agreement to slow Iran's nuclear weapons development, Tehran is coming in from the cold of decades of Western sanctions, even as it seeks to exploit the Middle East chaos to grow its influence.
Meanwhile, Saudi Arabia has to contend with uncertain support from its long-time backer, the United States.
Riyadh also faces a region – and, in fact, a world – influenced by decades of Saudi support for ultraconservative Wahhabist theology, which has been a springboard for Islamist militancy.
"For decades, Saudi Arabia's diplomacy revolved primarily around disseminating its conservative Wahhabi form of Islam and supporting pro-Saudi groupings within its geopolitical sphere," Philipps University's Middle East expert, Professor Udo Steinbach, wrote in September.
Underneath the ideology and politics is perhaps a greater challenge for both countries: the new reality of the global oil market.
Iran and Saudi Arabia face plunging oil prices and the potential surplus of more of the commodity on the market. Countries that have relied on imports in the past, like Canada and the US, can now export the energy, even as renewable energy gains traction, reducing demand.
Finding their footing in a world where being an oil producer is no longer a guaranteed source of political leverage – as it was in the 1970s – will prove a key test for both nations.
"In the new geopolitics of oil, competition for market share by producers has become a zero-sum situation, with the winner gaining market share and the loser being squeezed out," Fordham wrote.
That would be a big change from the last 40 years that pitted oil-producing countries against oil-consuming countries, she noted.
"Given tepid global economic growth and oil demand growth, [these new oil politics] will be at the heart of producer-producer relations for years to come in our view."