Reports of potential Iraq-led mediation between Iran and Saudi Arabia come as the latter leads the third year of a costly, intractable war across its border in Yemen.

A rapprochement with long-time rival Iran, which is backing opposing forces in the Yemen proxy war and in Syria, could ease political and economic pressures on both sides, analysts say. Although the struggle for regional supremacy has long defined Saudi-Iran relations, the extent of the turmoil in neighbouring countries might have led to the realisation that both would benefit from a thaw.

"There is a political dilemma where the Saudis are playing a role in Syria and Yemen ... It is straining Riyadh politically and economically, and [in both] places, Iran is playing an important role," said Mahjoob Zweiri, an associate professor of contemporary Middle East history at Qatar University. Oil production is also a factor, he noted.

"Both countries are important producers of oil, and any mediation efforts that lead to reducing the tension between them will affect oil prices positively," Zweiri told Al Jazeera.

OPINION: Saudi Arabia and Iran and how we got here

Earlier this week, Iraqi media reported that Saudi Crown Prince Mohammed bin Salman bin Abdulaziz Al Saud had asked Iraq's prime minister, Haider al-Abadi, to lead mediation with Iran. According to a report from the Iraqi Alghadeer channel, citing information from Iraqi Interior Minister Qasim al-Araji, Iran was looking at the request "positively".

Then, on Tuesday, leaked emails emerged in which Mohammed bin Salman told former US officials that he "wants out" of the Yemen war. The emails also indicated that the crown prince would not oppose a US rapprochement with Iran.

The reported request for Iraqi mediation comes just weeks after Iraqi Shia leader Muqtada al-Sadr travelled to Saudi to meet Mohammed bin Salman and other officials. "We have been very pleased with what we found to be a positive breakthrough in the Saudi-Iraqi relations, and we hope it is the beginning of the retreat of sectarian strife in the Arab-Islamic region," Sadr's office said in a statement after the meeting.

According to Iraqi political scientist Saad Jawad, this week's news of potential Saudi-Iran mediation must be viewed with scepticism - but if true, Iraq would be well positioned to "gain a reputation of being a moderate and neutral party" in the region.

Saudi Arabia and Iran, meanwhile, would benefit from a de-escalation of tensions, which hit a peak in January 2016 as Saudi severed diplomatic ties with Iran after protesters, reacting to Saudi's execution of Shia religious leader Nimr al-Nimr, attacked the country's embassy in Tehran.

"The escalation of the dispute has gone too far, and it is going towards an armed struggle, which I don't think the Saudis or the Iranians would like to see," Jawad told Al Jazeera.

The timing of the proposed mediation, however, is odd for various reasons. It comes just months after a Saudi-led group imposed a blockade on Qatar, issuing a list of 13 demands that included cutting off "military and intelligence cooperation" with Iran.

"The main Saudi request was for Qatar to sever its relations with Iran ... How could they ask Qatar to sever its relations, and on the other hand ask somebody to mediate with Iran?" Jawad asked.

Zweiri noted, however, that the demands issued in the Qatar-GCC crisis were contradictory; Qatar's foreign minister has suggested the primary goal was to "bully" his country into forfeiting its sovereignty. In addition, Saudi appeared to be differentiating between the "security" issues raised in the Gulf crisis and the idea of political mediation with Iran, Zweiri said.

From Iran's perspective, with the nuclear deal failing to deliver the economic miracle that Iranians were hoping for, improved relations with Saudi could give a major boost to the government of President Hassan Rouhani at a time when he faces internal challenges.

"If Iran responds positively to this mediation effort and really decides to open up to Saudi Arabia, this will tell us one thing - that the differences between both countries are politicised and have nothing to do with religion," Zweiri said. "If Iran puts conditions, or mentions such issues as the [ongoing conflict in the] eastern part of Saudi Arabia, this means religious issues are a priority for Iran. I do believe myself that Iran is a political issue. I think they will be more interested to open up, and the issue of Awamiya and other things, they will be the last items [on the agenda]."

The Awamiya factor

The current situation in Awamiya is another reason why the mediation proposal surprised some observers. For three months, Saudi Arabia has engaged in an unprecedented offensive against the eastern town, which has been a hotbed of Shia resistance in the country.

The Saudi campaign has flattened Awamiya's old quarter, reducing dozens of buildings to rubble and forcing thousands of people to flee. Clashes have resulted in casualties on both sides, with activists estimating more than 20 civilian deaths and Saudi authorities reporting the deaths of 12 police officers and special forces members.

The Saudi government has claimed that the goal of its operation in Awamiya was to root out "terrorists" and prime the area for redevelopment, but Adam Coogle, a Middle East researcher with Human Rights Watch, told Al Jazeera that the driver of dissent in eastern Saudi Arabia was the government's "long-term and systematic discrimination" against Saudi Shia citizens. Awamiya was also home to Nimr, whose death sparked outrage throughout Shia-majority Iran.

Without a change in state policy, the unrest in eastern Saudi will likely continue to fester, Coogle said: "As long as Saudi authorities continue this discrimination, they will face dissent from the Saudi Shia community."

#نريد_الرجوع_لمنازلنا_بالعوامية

Displaced people of #Awamia are expressing their will and eagerness to go back home in this hashtag. — Angry Qatifi (@AngryQatifi) August 13, 2017

Ali Adubisi, the director of the European Saudi Organisation for Human Rights, a Berlin-based activist group, said the brutality of the state's campaign in Awamiya was unparalleled in the country's history. Thousands of displaced residents are now facing an uncertain future, he added.

"In this process, the state relied not only on weapons but also on the official media, which was lying, misleading and falsifying facts. Regional and religious hatred was also used to ensure the greatest acceptance of [Saudi's] crimes in this military operation," Adubisi told Al Jazeera, noting that the offensive, contrary to its aim of quashing opposition, would likely rally more citizens against the state.

"I think it will increase the peaceful civilian opposition ... The military process has shown unprecedented repressive dimensions, and many people outside of Awamiya [and media professionals] were stunned by what they saw."

How this internal conflict could affect potential mediation with Iran, however, remains to be seen.

Follow Megan O'Toole on Twitter: @megan_otoole