Yet Azzam already ups the ante in the mega-yacht arms race. There is no other yacht currently under construction that would top Azzam, according to industry executives. Roman Abramovich has comfortably held the title since 2010. By most measures, Larry Ellison claimed the title in 2004, with his 454-foot yacht, Rising Sun, which in turn had topped the 414-foot Octopus, owned by Microsoft co-founder Paul Allen.

Today, Rising Sun is only the 9th largest yacht in the world and is now owned by David Geffen. Larry Ellison recently took delivery of a smaller yacht, at around 250 feet.

As the battle for the largest-yacht title rages, the broader yacht market remains weak. Yacht experts say there are dozens of yachts larger than 250 feet for sale around the world, yet buyers are scarce.

“There are too many boats and only a handful of people who are willing and able to buy right now,” said one executive. “Azzam is not a sign that the industry is stronger or that wealth is growing again. It’s a sign that the world is still buying a lot of oil from the Middle East.”

-By CNBC's Robert FrankFollow Robert Frank on Twitter: @robtfrank

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