It's both things. Lovecraft in his late life was actuality very critical of the Wasp aristocray and it's values, often depicting them as corrupt and deranged, so I don't think that the religion being non western is by itself the horror part. Nonetheless, the idea of following a god all your life, and realizing you followed the wrong one, realizing that the real gods and meaning of life is not what you believe, and it's not for you to follow, but for someone else, is pretty chilling.