The Reagan administration, in submitting a $354 million request to Congress yesterday for arms sales to Saudi Arabia, cited escalation of the Iran-Iraq war and "several direct and very high-level appeals" from the Saudis as reasons for seeking the controversial sale now.

The request came as Arab sources said that fears the war might spill over into neighboring Kuwait had caused Saudi Arabia to take a tougher stand. One source familiar with Saudi thinking said the Saudis were prepared to launch "a war of massive retaliation" against Iran if fighting spread into Kuwait or Saudi territory as the Iranians have threatened.

"The Saudis are very concerned about a spillover into Kuwait," the source said. "If that happens, they would have to go to war. But they can't afford a war of attrition. They would have to make a massive retaliation."

A senior administration official, in defending the request, said no new arms were involved in the package of Sidewinder air-to-air, Harpoon air-to-sea and Stinger ground-to-air missiles.

"If this sale is not approved and we are unable to respond to Saudi Arabia's legitimate defensive needs at this critical point, our credibility will be seriously eroded and our message of deterrence to Iran undermined," the official said.

He said President Reagan had planned to announce the arms sale later this year but that "recent events in the Persian gulf, urgent consultations with Saudi Arabia and a direct, high-level request from the Saudi leadership have convinced the United States of the need to move immediately."

These arms are needed for Saudi defense, can be absorbed by the Saudi military and do not represent a threat to Israel, he said.

The official said, however, that deliveries would not begin until 1989 and would stretch to 1991, leaving unclear how the additional arms would help Saudi Arabia in the current crisis. He also said this is the only arms request the administration plans for Saudi Arabia the rest of this year.

Opponents to the sale in Congress, led by Sen. Alan Cranston (D-Calif.) and Rep. Mel Levine (D-Calif.), immediately predicted that they would be able to block the administration request by gaining enough cosponsors for resolutions that they plan to submit at the end of the 20-day informal notification period, which began yesterday.

Congress must vote against the arms request within 30 days of its formal submission or it automatically takes effect. But opponents believe they will need a two-thirds majority in each house to override an expected presidential veto.

"We see no erosion in the strong opposition to the sale, and Cranston is determined to push the resolution to a vote," an aide to the senator said. He said Cranston hopes to get "75 to 80" cosponsors for his resolution, enough to override a veto.

Cranston, in a speech on the Senate floor yesterday, said a confrontation between Congress and the White House "may no longer be avoidable" and called it a "watershed" in U.S.-Saudi relations.

Charging that the Saudis were "scorning basic American interests in the region," Cranston said his opposition to the latest Saudi request for arms, after more than $40 billion in U.S. weapons sales to the kingdom, was "a rejection of a failed policy more than a fight over a specific arms export request."