Iran and Saudi Arabia are the two main powers of the Middle East. Since Islamic revolution (1979) the competition for power, security and regional dominance has resulted in proxy wars in the region, especially, Bahrain, Lebanon, Iraq, Syria and Yemen. Saudi and Iranian rivalry revolves around some key issues such as; their contradictory ideologies (Sunni vs Shiite) PanArab issues like Palestine issue, Saudi inclination towards West, their contradictory policies about energy and desire to become dominant power of entire region. Iran's wants regional hegemony, rolling back US influence in the Middle East, empowerment of Shiite in the Middle East through sectarianism. Sectarianism has always been a major focus in the Persian Gulf and beyond for the Iranian regional policy formulation. Peace and stability in Middle East would not be possible till Riyadh and Tehran end rivalry.