Long threatened by potential spillover from the Iranian-Iraqi conflict, Arab petroleum producers of the Persian Gulf have set off a price war of their own in a desperate gamble to discipline an increasingly chaotic international crude oil market.

Directed by Saudi Arabia, the other gulf producers -- Kuwait, the United Arab Emirates and Qatar -- have abandoned their traditional avoidance of confrontation to swamp an already glutted oil market with crude that is the world's least expensive to extract.

With the boom years of the 1970s now a receding memory, Saudi Arabia felt constrained to act by such ugly reminders of financial ill health as last year's $24 billion government budget deficit.

With belt-tightening visible in the 31 percent drop in Saudi imports in the first half of 1985 and mountains of unpaid bills, the royal family embarked reluctantly on the price war to provide money to keep the lid on.

"They know better than anyone that Saudi Arabia is nothing without money -- and plenty of it," said an oil man with long experience in the Middle East. "They had no choice," a Bahrain-based banker said.

To varying degrees throughout the gulf, Arab producers and their citizens have come to accept as conventional wisdom that demand -- and a return to anything like the old price level -- may not recover until the mid-1990s.

Now, with increasingly pointed public reminders from Saudi Oil Minister Ahmed Zaki Yamani and his gulf counterparts of more to come, the campaign has slashed up to $8 a barrel off spot prices in Europe during the past six weeks.

Late last month, for the first time since 1979, oil dropped below $20 a barrel -- less than half the peak realized by the then powerful Organization of Petroleum Exporting Countries after the Iranian revolution of that year.

Yamani's high-risk strategy calls for a two-pronged attack. In the front line are high-cost British and Norwegian producers in the North Sea, who are pumping at maximum capacity. Saudi Arabia hopes to force these vulnerable non-OPEC producers into a trend-setting cutback of perhaps up to 10 percent of their production.

Gulf specialists argue that such a deal could be applied worldwide to both OPEC's 13 members and independent producers to stabilize the market, with Arabian light marker crude returning to $28 a barrel.

The strategy also is aimed at frightening the nominally free-trading Reagan administration into at least tolerating efforts to put back together a semblance of OPEC's effective price-fixing cartel of the 1970s.

Yamani's warning that the price of crude could fall to less than $15 a barrel is seen by oil specialists as a signal to Washington that a major world financial crisis is unavoidable, with unforeseeable consequences for American banks and some key, but badly strapped, U.S. allies.

For example, the specialists here contend that Mexico, a non-OPEC producer and the main U.S. source of oil imports, could not make good its rescheduled massive debt payments if oil falls below $20 a barrel. Mexico announced Friday that it had cut its average price by $4, to $19.75 a barrel.

But behind a facade of solidarity backing Yamani's confident predictions of victory lies serious uneasiness among his gulf allies, not only about the wisdom of his war, but also about the open-ended dangers.

How, ask the doubters, could Saudi Arabia guarantee compliance with any such agreement to limit production when its fellow OPEC members pioneered a panoply of mechanisms to cheat on their OPEC quotas?

Oil traders, bankers, diplomats and gulf politicians are acutely aware that flooding an already glutted market could drive the price of crude as low as "$5 to $8 a barrel," in one specialist's worried opinion.

Or as an oil trader in Bahrain put it, a "complete collapse in oil prices is quite possible," since the glutted market has no "natural floor" and is "inelastic" -- that is, unresponsive to normal supply and demand.

This trend surprises even seasoned traders, who had predicted only weeks ago that the barrel would go below $20 only in the second quarter, when demand traditionally slackens after winter in the Northern Hemisphere.

"Fifteen-dollar oil is untenable for all producers," a Bahrain trader argued, "therefore, an accommodation will be worked out."

Such optimism was not shared by a ranking official of the Kuwait Petroleum Corp., which has vast operations ranging from drilling to local and overseas refineries and thousands of service stations in Europe.

"Even if we win the price war," he said, "oil is likely to go down to $15 and may stay there for a year."

But, one worried western diplomat said, if "no one is in control, oil traders are convinced that Yamani and his allies will continue increasing production for at least another month in the hopes of softening up their opponents."

Already sources close to the Saudis claim that Yamani has persuaded the British to begin talks.

Such is the logic of the gulf producers' decision at the December OPEC meeting in Geneva to recapture an undefined "fair market share" for all 13 members, many of whom exacerbated the crisis by exceeding their production quotas.

Only such a demonstration -- and Saudi production recently has more than doubled from a 20-year low last summer of 2 million barrels a day -- can prove Yamani's determination in the face of growing concern about a dangerous drift in Saudi policy, oil specialists argue.

Within months, if required, Saudi Arabia could reach its installed capacity of 12 million barrels a day -- roughly two-thirds of OPEC's current shrunken share of the international market.

The current world market situation has blunted greatly what once was widely considered Saudi Arabia's "Arab oil weapon."

Devised by the late king Faisal in 1972, the "oil weapon" was unsheathed the following year during the Arab-Israeli war.

But the Arab oil embargo against the United States and the Netherlands is as distant a memory as is the Arab unity before the outbreak of the Iranian-Iraqi war in 1980.

Similarly blunted is the "Arab petrodollar weapon," the combination of largesse and political pressure that accompanied gulf aid projects in the Third World.

As Saudi and other gulf producers' oil revenues dipped, so did their political influence in the Arab world. Washington, for example, overestimated their clout with Syria during the U.S. search for solutions in Lebanon.

But what some pessimists perhaps too quickly decided was the "end of the Saudi era" came after OPEC oil prices dropped $5 a barrel in 1983. That decrease, which caught OPEC off guard, resulted largely from conservation measures by the large industrialized countries. Oil prices have never recovered.

With hindsight, specialists fault Saudi insistence then on remaining the "swing producer" -- OPEC's final arbiter.

"That made sense in a boom market," a banker in Bahrain commented, "but not in a steadily declining market, which Yamani misjudged."

In essence, Saudi Arabia was forced to accept all the sacrifices as other producers took full advantage to maximize their production.

One specialist estimates that since 1980, OPEC income has slipped from $260 billion to $160 billion, with Saudi Arabia absorbing 70 percent of the loss.

It was the Saudi royal family, overriding Yamani, that decided on the price-war strategy last fall, according to diplomats and oil specialists.

"People have gotten so used to taking Yamani's words as gospel," a European diplomat stationed in the Persian Gulf said, "that they forget that he is the servant of the royal family whose key members are not oil specialists but are the key decision makers."

Ironically, it was OPEC's success in nationalizing foreign-owned oil companies that in the 1960s and 1970s broke up the so-called "integrated operations" of the major British- and American-controlled oil companies.

These companies used their integrated operations to iron out short-term fluctuations in the market and invested on a long-term basis to ensure that oil was available where needed. OPEC ended their role as the oil world's crisis managers.

Even if OPEC does bring the North Sea producers to heel, it will still find it hard to win back quickly the market share it has lost over the years, according to the specialists.

One trader remarked, "It is almost easier to predict the price of oil in 10 years than in 10 months." Within a decade, he said, the main gulf producers should be able once again to call the tune.

Thanks to a small population, known reserves representing 65 percent of the world's total, and low extraction costs, they will have outlasted the smaller producers -- ranging from minor OPEC members such as Algeria to North Sea producers whose output is expected to fall sharply in the years to come.

But in the meantime, the gulf producers are no more immune than other oil exporters to potential political strains as their revenues decline or level off.

"Don't underestimate the strains among special interest groups," a western diplomat said, "among the armed forces, the ruling families, business interests and the welfare-state lobby."

The end of easy OPEC money, however, is readily acknowledged -- and often surprisingly welcomed -- by some gulf Arabs who believe that the boom in the welfare state helped kill initiative and traditional values.