While the row between Iran and Saudi Arabia boiled over after the execution of a Shiite cleric that lead to Iranian protesters storming into the Kingdom's embassy in Tehran, Smith does not consider the execution as a sectarian issue. Instead, he says it was an effort of internal stabilization by the Saudis.
"It's only the Iranian that looks at this problem through a sectarian prism," he said. "The 47 individuals who were executed, this was not a sectarian issue to [Saudi Arabia]; it was an internal stability issue by punishing terrorists and those who've incited terrorism."
The U.S. has yet to interfere, but another former U.S. ambassador to Saudi Arabia, Robert Jordan, says events like "the red line in Syria, the Iran nuclear deal and now the Iranian missiles this past week," have contributed to Saudi concern.
"At each turn, the Saudis see a weaker America, an indecisive America, and one that they can't really count on," he told CNBC on Tuesday.
Fears have reached investors who are eyeing oil in the event of a conflict escalation. In this regard, Jordan says the market has yet to see a full-on price war.