Before Al-Quaeda even made that statement this week, RBC Capital Markets says 2016 could be "the year of living dangerously" for Saudi Arabia.

With the exception of local Aussie junior Buru Energy making a play-opening discovery in Western Australia's remote Canning Basin, the oil world has gotten off to a horrific start to 2016, with frightening tensions in the Middle East and Chinese regulators again halting trading and ordering a major devaluation of the Yuan, sparking panic across global markets, particularly the ASX.

Saudi Arabia is also paying for its shenanigans in refusing to budge on OPEC's production ceiling, with its Ministry of Finance's 2016 budget projecting record deficits due to low oil prices and pledging sweeping reforms to put the country's fiscal house in order - better enabling it to ride out a "lower for longer" storm.

RBC says that if these are fully implemented, these measures could reconfigure the lavish social contract between the monarchy and the Saudi citizenry, which has helped to underpin stability in the Kingdom for decades.

In a potential sign that the leadership is committed to carrying out these changes, petrol prices were raised by nearly 50% hours after the budget was released.

"The new policy directives once again prove that the country's de facto ruler, Deputy Crown Prince Mohammad bin Salman, is anything but risk adverse as the domestic and regional security backdrop can hardly be considered benign," RBC said.

While Wood Mackenzie's Macro Oils team forecasts continued global oversupplies in the second half of 2016 that should quell the oil price response as tensions escalate between the Saudis and Iran, analysts predict the Kingdom will keep seeking market share, along with a decline in non-OPEC supply this year.

This is a sharp contrast to forecasts just a year ago.

With demand forecast to grow, Wood Mackenzie sees the supply-demand balance tightening in coming months, making oil price more vulnerable to political risk.

However, in a brief piece of positive news, Saudi Arabia's Deputy Crown Prince Mohammed bin Salman told The Economist that war with Iran was "something that we do not foresee at all, and whoever is pushing towards that is somebody who is not in their right mind".

Dr Alon Ben-Meir, a professor of international relations at the Centre for Global Affairs at New York University, said the Kingdom's decision to execute Sheikh Nimr al-Nimr in the past fortnight along with 46 mostly Sunni Muslims convicted on terrorist charges was an "act of defiance" aimed not only at OPEC rival Iran, but the US, whose shale oil boom has transformed world oil markets and sapped the cartel's influence.

"The Saudis wanted to send a blatant and carefully calculated message that the Kingdom is capable of standing on its own, and it will not be deterred by either the already destabilised region or by the repercussions of its act," the professor said.

He said the Saudis felt betrayed by the secret nuclear negotiations between the US and Iran that could see the latter dump half a million barrels of crude onto the market as early as next month which could further drive down oil prices.

Riyadh also ewed the Iran deal as a bad deal for having multiple loopholes, which the Saudis believe Iran will exploit since it is determined to acquire nuclear weapons at any cost.

The professor said Saudi Arabia intended to exclude Iran from playing an active role in the search for a solution to Syria's civil war while impeding the growing alliance between Moscow and Tehran to control the predominantly Sunni Syria.

Similarly, as Saudi Arabia is fighting a proxy war against Iran in Syria, Iraq, and Yemen, it is determined not to allow Iran free regional reign.

"By creating the crisis, Saudi Arabia also hopes to disrupt the warming relations between Iran and the US, which it views as contrary to its interests," he said.

"In addition, Saudi Arabia hopes to undermine the European Union's drive for rapprochement with Iran, as it otherwise has the potential of becoming the largest trading partner with the EU."

He said the Saudis saw the ransacking of its embassy in Tehran as a "blessing in disguise", playing into their hands and putting Iran's President Hassan Rouhani on the defensive, prompting Iran to condemn the act.

"This has boosted the Saudi position and potentially changed the conflict dynamic between the two countries," the professor added.

He said the US should impose new sanctions against Iran for testing intercontinental ballistic missiles in violation of UNSC Resolution 1929, which was particularly important not only to appease Saudi Arabia, but also to send a clear message to Tehran that it cannot violate international agreements with impunity.

"It would be wise for Secretary of State John Kerry to travel to Riyadh, even for only symbolic reasons, and reiterate the US' commitment to Saudi national security," he said.

"In addition, his visit would allay the Gulf states' concerns that the US is being more critical of Saudi Arabia than Iran, a perception that could further reduce US influence, especially in Riyadh when it is needed the most."