McCain: Obama 'delusional' on possible Iran deal

Sen. McCain: Arm free Syrian army
Sen. McCain: Arm free Syrian army

Returning from Saudi Arabia, Senate Armed Services Committee Chairman John McCain told CNBC on Wednesday he's most concerned about the threat posed by Iran.

"There's a delusion that somehow we're going to have an agreement with Iran ... [and] that we'll all be working together," the Arizona Republican said in a "Squawk Box" interview. "Iranians are on the march in the Mideast."

McCain said the Saudis "perceive a lack of strong American leadership," as Iran gains significant influence in Iraq, Syria, Lebanon, and Yemen.

McCain, who lost the 2008 presidential election to Barack Obama, joined the president and other bipartisan U.S. dignitaries in Saudi Arabia on Tuesday to pay respects to the late King Abdullah and to meet the new leader of the oil-rich nation, King Salman.

The leadership transition is going smoothly, and Salman's rule will be "in keeping the Saudi policies" toward the U.S. and the region, McCain said.

"The Saudis are more frightened, and I'm more concerned about the rise of ISIS [Islamic State militants] and even more about the incursions by Iran in different countries," he added.

McCain offered solutions to these growing threats. "We should arm the Free Syrian Army. We should have more American boots on the ground in Iraq and Syria in the form of forward air controllers, intelligence capabilities, [and] special forces." He said the U.S. needs to understand that Iraq and Syria are not different conflicts.

On domestic issues, McCain said he's holding a hearing in the Armed Services Committee on Wednesday to investigate the negative impact of the sequestration spending cuts on the U.S. military.

"We need to repeal sequestration," he said—adding that this budget mechanism puts the military at risk of not being able to properly defend the nation.