As two influential regional rivals in the Middle East, Iran and Saudi Arabia play a pivotal role in shaping the region's security and politics. Their tense and sometimes competitive relationship have taken on new dimensions, especially since the beginning of the Islamic Awakening and the shift in the regional balance of power. Due to its geopolitical location, strategic corridors, and transnational ties, Yemen is at the center of the confrontation between Tehran and Riyadh, one of the most important arenas of proxy competition. This study examines the consequences of the March 2023 agreement between Iran and Saudi Arabia to normalize relations, focusing on China's role as mediator in resolving the Yemeni crisis. Using the "balance of power" theoretical framework and a descriptive-analytical research method, this study collected data through a qualitative secondary analysis of reputable academic literature. The study's central question is how the geopolitical shift at the macro level has affected the equations and dynamics of the proxy war in Yemen. The findings suggest that normalization of relations, primarily via proxy de-escalation mechanisms and establishment of indirect communication channels between the involved parties, acted as a facilitating mediator variable. This has created an environment conducive to a reduction in conflict intensity and a gradual shift in focus from a military approach to political discourse in Yemen. However, data analysis shows that, although significant, this effect is not necessarily decisive. Sustainable peace in Yemen depends on endogenous, fundamental variables, such as empowering local political institutions, resolving internal inter-consensus conflicts, and forming an inclusive governance framework. Meanwhile, Iran and Saudi Arabia's roles can mainly be defined in moderating the behavior of proxy groups and strengthening multilateral peace processes. Therefore, it can be argued that, while the 2023 agreement cannot end the Yemeni crisis on its own, it accelerates the transition toward a sustainable political solution by reducing the intensity of the conflict and redefining regional security parameters.