The purpose of the study is to observe the radical changes in Middle Eastern politics as well as to understand the struggle for economic, political and social influence in the region. Saudi Arabia and Islamic Republic of Iran are the most important states of the Middle East. The research also deals with the analytical approach of US policies towards Iran and Saudi Arabia. The theory Balance of Power has been used to understand the power struggle of the both states, (Iran and Saudi Arabia)in the Middle East. Both of these States have been struggling for power in the region. Saudi Arabia has its economic influence, whereas, Iran is influential owing to its military capacity. The aim of becoming hegemonic power, led them to the conflicts and rivalry. The revolution of 1979 of Iran was great threat to the Saudi Arabia as well as its allies. This threat initiated proxy wars in the region. Subsequently, Saudi Arabia and Iran adopted unfriendly approaches against each other.