That's a fair point, we have no problem with either Iran or KSA, so it's hard to pick a side.
And we are currently the top trading partner for both these countries.
Personally, I don't think China should get involved in the sectarian divides of the Middle East. That seems like a very dangerous thing to do.
The entire world is fighting in the Middle East right now, except for China. Our only involvement is economic, and in terms of selling weapons like our armed drones to the Iraqi Government.
That said, I do think Iran should be allowed to join the SCO. You have seen we are even willing to let our rivals like India into it, so I don't see why Iran should not be.