The CNN report comes hours after President Donald Trump told reporters that King Salman of Saudi Arabia strongly denied his government had any involvement in Khashoggi's disappearance and said "rogue killers" could be responsible.
Khashoggi, a familiar face on Arab talk shows, moved to Washington past year fearing retribution for his criticism of Prince Mohammed, who has cracked down on dissent with arrests.
When asked if he would impose sanctions on the Saudis, he said it "depends on what the sanction is".
According to Saudi-owned Al Arabiya television, the kingdom has "over 30 measures" it could implement.
Freeland responded by saying she expressed Canada's "deep concerns" over Khashoggi's disappearance in a call with her Saudi counterpart.
The press agency also released a statement of support from the government of Yemen, which Saudi Arabia is supporting in a protracted war against Iran-backed Houthi rebels in the Middle East's most impoverished country.
Khashoggi's fate has troubled Washington and Saudi Arabia's other traditional Western allies.
Turkish officials have said they fear a Saudi hit team killed and dismembered Khashoggi, who wrote critically of Saudi Crown Prince Mohammed bin Salman. Turkish officials have also said they have audio and video recordings of Khashoggi's interrogation.
President Donald Trump initially made it clear that whatever the outcome of the inquiry into the disappearance of Khashoggi, the USA would not forgo billions of dollars in arms deals with Saudi Arabia.
Pixel camera app to score a long-awaited feature on October 18
It's these kinds of small design changes that give the phones a much more refined look than last year's Pixel phones. This works similarly, to when you're taking a selfie; the camera even recognises when you're making a amusing face.
Alhadj said he didn't think the Khashoggi case would have much influence on American officials who retire and go to work for the Saudis, providing their expertise to the kingdom for a hefty paycheck.
Treasury Secretary Steven Mnuchin is still scheduled to attend the October 23 Future Investment Initiative in Saudi Arabia, White House economic adviser Larry Kudlow told Fox News. United States lawmakers have threatened to take action against the kingdom such as blocking arms sales. "He (Trump) will take action".
It later clawed back some losses to close the day down 3.5 percent at 7,266.59 points.
Saudi Arabia unapologetically flogs, imprisons - and occasionally, crucifies - people for committing the crime of "homosexual intercourse".
Mohammed Zidan, market strategist at Thinkmarket in Dubai, said the drop in Saudi stocks was linked to the uncertainty surrounding the Khashoggi affair.
Alphabet Inc's Google on October 15 became the latest company to say it would boycott the Future Investment Initiative Summit scheduled to be held in Riyadh starting October 23.
The head of JP Morgan, Jamie Dimon, is one of the latest high-profile executives to pull out.
The cancellations have cast a pall over the annual summit at which Prince Mohammed wowed investors a year ago with talking robots and blueprints for a futuristic mega city.