I wouldn't say that the Middle East has ever been the most pluralistic place in the world, but it was far more liberal than it is today. The wave of democratic and totalitarian/communist regimes that spread over the world during the Cold War mostly spared the Middle East. There were good reasons for that, since the powers that be had vested interests in preserving stability there. The ME was considered of "vital interest", one of those diplomatic coded terms, and has continued as such in Western foreign policy since the 30s.

Both the US and UK maintained special relationships with Iran and Saudi after WW2; the US had ARAMCO with the Saudis, and the Brits had AIOC with Iran, which had provided oil on the cheap to the UK since 1908. That all changed when Mossadegh nationalized the Iranian oil industry, which set in motion a series of events that shaped subsequent Saudi foreign policy for the net few decades.

Mossadegh walked a political tightrope in 1951. The Tudeh was the communist party that enjoyed a majority in the Iranian Parliament, the Majlis, and they desperately wanted to socialize the economy. Mossadegh, though, was no socialist so he resisted them, but he saw opportunity in nationalizing the AIOC, which had been extricating wealth from the Iranians for more than a generation for the benefit of Brits. Nationalizing the AIOC benefited him and Iran for two reasons: 1) it bought him credibility with the Majlis, and 2) it would allow him to fund his government, which was cash-strapped. So he nationalized it and expropriated its assets, but the Brits were pretty unhappy that they'd have to pay market price for AIOC oil. So the Brits and Americans executed a fascinating little plan titled Operation Ajax in 1953 and deposed Mossadegh, installed the Shah, and preserved the UK's relationship with AIOC. The Shah was perfect for the West, but he brutally repressed his people. The only sanctuary for dissent was in the Mosques. So that's where the revolutionaries incubated for 25 years until their vitriolic, anti-American force, still seething from American/UK meddling in their domestic politics, took to the streets and deposed the Shah in 1979.

The new government of Iran was something neither the US or UK even considered possible. Their devotion to a brand of politicized Islamic fascism was anathema to Western civilization, and they eagerly embraced some pretty horrific tactics and positions: they propagated terror abroad, supported kidnappers, and armed HAMAS, Hiz'b Allah, and other factions known for their involvement in anti-Western struggle. The Muslim world stood in awe of this new power in the ME, the majority of which was still roiling from resounding defeats at the hands of Israel, widely viewed as an American proxy. So their soft power and influence in the region grew.

Enter the Saudis, who fear Iranian domination of the region more than anything. They figured out early on that Wahaabiism was a good way to preserve their power much earlier (funded by petro-dollars, of course) when the rest of the world's governments were being divided up as proxies for either the US or the USSR. But they weren't yet spreading that anachronistic brand of Islam to the entire Muslim world. It's probably not coincidence that the Saudis began their campaign to weaponize Islam and proselytize it shortly after the Iranians began proselytizing their version politicized Islam against Western hegemony. So the Saudis funded a few crazies in the backwaters of Afghanistan against the Soviets: the Mujihideen. And it was wildly successful. This was their first real experiment funding mosques and madrasas, so why not do more? It's an inexpensive way to force-multiply and it's basically self-sustaining. As the Iranians built their proxies nearby in Syria, Lebanon, and Palestine, the Saudis responded in kind, albeit with much greater success everywhere else.

The law of unintended consequences is at play here. We had good (or at least debatable) reason to depose Mossadegh, but 25 years later it set in motion a series of events that fuel conflict through their proxies in the ME and elsewhere to this day. It's been a race to the ideological bottom, and the ME is a far more conservative place today because of that.

When the USSR was in the process of collapsing, I think it was Shevardnadze who relayed a warning to Lawrence Eagleburger: "We will deprive you of an enemy and then what will you do?” The Saudis, for better or worse, have had their enemy for 37 years in plain sight, and they're the Shi'ite masses in Persia. Even if they could put the Islamo-fascist Wahaabi genie back into the lamp, I doubt that they would.