The Gunners were a goal ahead after just four minutes when Alexis Sanchez found the back of the net. The young star Iwobi doubled the home sides lead seven minutes before half time.
Hector Bellerin put Arsenal 3-0 ahead in the 48th minute while Theo Walcott scored his sides forth in injury time.
The victory means the Gunners are eight points behind league leaders Leicester City.
Arsenal 4- 0 Watford
Kick-Off: 15:00 GMT
Arsenal starting lineup:
Ospina; Bellerin, Gabriel, Koscielny, Monreal; Elneny, Coquelin, Sanchez, Ozil, Welbeck; Iwobi
Watford starting lineup:
Gomes (GK); Nyom, Prödl, Cathcart, Ake; Capoue, Watson, Suarez; Abdi, Deeney (c); Ighalo