Benzema, 38, left Real Madrid for Al-Ittihad in the summer of 2023 on a three-year contract, before switching to Saudi rivals Al-Hilal in early February on a deal running to the summer of 2027.
The former France international has scored ten goals and provided five assists in 14 competitive appearances for Al-Hilal since making that move.
According to Sky journalist Sacha Tavolieri, Al-Hilal now want to move Benzema on and are searching for a replacement, though the situation is described as an extremely complicated and politically sensitive matter.
A significant portion of Benzema's contract is understood to be financed by Saudi authorities as well as by the club itself, meaning any departure would require sign-off beyond a straightforward agreement between player and club.
Benzema, for his part, wants to leave as a free agent but is also seeking to be paid the final year of his contract in full, a condition that has not been well received by the club, the Saudi Pro League or the relevant authorities.
Watkins has been floated by Tavolieri as one option to succeed Benzema at Al-Hilal, with the two parties said to have already agreed personal terms over a potential move. The England international has two years remaining on his contract at Aston Villa, having scored 16 goals and provided three assists in 37 Premier League appearances last season.
Any move for the 30-year-old striker would first depend on Al-Hilal resolving the Benzema situation, given the club's stated priority of freeing up their foreign player quota and finances before pursuing a replacement.
Aston Villa manager Unai Emery has previously suggested that Watkins was rested from recent fixtures purely for recovery reasons following a long World Cup campaign, though the growing speculation around his future has added further intrigue to his situation.
No formal offer has yet been made to Villa, with Al-Hilal understood to be unable to move forward with the pursuit until Benzema's contract situation is resolved one way or another.