Divisions between Sunni and Shia factions flared up violently after the Saudi government executed a top Shia cleric, Sheik Nimr al-Nimr, as part of a mass execution of 47 people on Jan. 2. The Saudi government claimed the executed individuals were terrorists. Protests began almost immediately in Iran and the Saudi Embassy in Tehran was set on fire. Embassy staff managed to escape unharmed.
The Saudi government responded by severing diplomatic relations with Iran and gave its diplomats 48 hours to leave the country. Foreign Minister Adel al-Jubier said the Iranians have an “aggressive policy in the region, which aims to destabilize security and stability, and to provoke conflict and wars.” The Saudis recently banned all flights from Iran. Bahrain and Sudan have also severed diplomatic ties with Iran. The United Arab Emirates downgraded its diplomatic ties with Iran.
"We believe that diplomatic engagement and direct conversations remain essential in working through differences and we will continue to urge leaders across the region to take affirmative steps to calm tensions," State Department spokesman John Kirby said in a statement Monday.
Iran and Saudi Arabia have been fighting proxy wars in Yemen and Syria, but these new tensions could have serious implications for the West. At the end of 2015 both nations participated in American-led talks in New York aimed at seeking a political solution. But the severing of diplomatic ties between the two threatens the future of those negotiations, and therefore threatens the American strategy for resolving that devastating conflict and eventually defeating ISIS.
The second and more immediate alarm for Americans is the potential rise in oil prices. The Wall Street Journal reports Monday that oil prices rose over concerns about Middle East tensions and weak economic data out of China. Investors worry that tensions between Saudi Arabia and Iran could disrupt the flow the oil. Recent data shows that the two countries combined produce about 13 million barrels of crude oil a day.
A bomb attack on an Israeli army vehicle close to the Lebanon border has drawn a response from Israel, which shelled Lebanese territory.
The militant Hezbollah movement said it had detonated a large explosive device beside armoured vehicles patrolling the disputed Shebaa Farms area.
Lebanese media said the retaliatory shellfire hit the village of Wazzani.
Tensions between Israel and Hezbollah were heightened by the killing of a prominent militant in Syria last month.
Hezbollah vowed to hold Israel to account for the killing of Samir Qantar in a missile strike in the capital Damascus. Israel's government welcomed news of his death, but did not confirm it was responsible.
'Vehicle destroyed '
An Israeli military spokesman said two armoured vehicles, one of them a bulldozer, were targeted in Monday's attack on a road in the western Mount Dov or Shebaa Farms area, a tract of land between the borders of Israel, Lebanon and Syria.
No soldiers were killed in the attack but that there were injuries, a military source told the BBC.
Lebanese media reported that shells fired by Israeli artillery in response hit Wazzani and nearby areas, and that there were reports of injuries.
Hezbollah subsequently declared that a cell named after Qantar was behind the bombing.
"The martyr leader Samir Qantar group detonated a large explosive device on an Israeli patrol in the Shebaa Farms... which destroyed an Israeli vehicle... and injured those inside it," a statement said.
Following Qantar's death, Hezbollah's leader Hassan Nasrallah said it reserved "the right to respond to this assassination at the time and place of our choosing".
Qantar, a Lebanese Druze, spent almost 30 years in prison in Israel for a notorious attack in which four people were killed, but was released in 2008 in an exchange with Hezbollah.
He later joined the Shia Islamist movement and at the time of his death was involved in "resistance" against Israel's occupation of the Syrian Golan Heights.