Iran has retaliated with drone attacks after Israel struck nuclear and military targets in the Iranian capital Tehran.
Israel hit dozens of sites on Friday as tensions soared after a United Nations agency found Iran was not complying with its nuclear non-proliferation obligations.
Prime Minister Anthony Albanese said any escalation in the region was concerning.
"We, of course, are very conscious of the threat that Iran becoming a nuclear state would represent to peace and security in the region as well," he told reporters in Fiji.
"We want to see these issues resolved through dialogue and the United States have been playing an important role there."
Foreign Minister Penny Wong said the conflict risked further destabilising a volatile region.
"We call on all parties to refrain from actions and rhetoric that ... would further exacerbate tensions," she said.
The federal government's Smartraveller website was updated on Friday with a "do not travel" warning for Iran.
Iran halted flights at Imam Khomeini International Airport outside of Tehran, the country's main airport, Iranian state TV said.
Tensions had been building in the region as US efforts to reach a nuclear deal with Iran appeared to be deadlocked.
US intelligence previously indicated Israel was preparing for a strike against Iran's nuclear facilities, as part of ongoing efforts to stop Tehran from developing a nuclear weapon.
US President Donald Trump on Thursday warned there was a "chance of massive conflict" involving Iran as Washington began pulling out diplomats from the Middle East.
Jessica Genauer, senior lecturer in international relations at Flinders University, said Israeli Prime Minister Benjamin Netanyahu's decision to attack Iran was likely driven by domestic concerns.
"Netanyahu faces political dissatisfaction with his handling of the Hamas-Israel war," she said.
"Recent suggestions that Trump is turning away from a close friendship with Netanyahu is further eroding Netanyahu's popularity.
"By attacking Iran, Netanyahu hopes to reinforce the fear of an external threat to Israel - and support for his government as competent and tough on security."
The Iranian regime has been greatly weakened by domestic unrest, economic sanctions and the dismantling by Israel of proxy forces in the region - including Hamas, Hezbollah and Iranian supply routes in Syria.
But not responding to the attack would undermine the regime's legitimacy, Dr Genauer said.
"So, we can expect Iran to respond ... with drone and missile attacks against Israel," she said.
Iran's Supreme Leader Ayatollah Ali Khamenei warned of "severe punishment" for Israel, accusing it of revealing "its malicious nature even more than before by targeting residential areas", in a post on X.
Israel's ambassador to Australia Amir Maimon said the "pre-emptive" strike was necessary to neuter Iran's nuclear program.
"A nuclear-armed Iran poses an existential threat to the State of Israel and a grave danger to regional and global stability," he said in a statement.
Meanwhile, Senator Wong announced Australia would provide an extra $10 million to help with the distribution of urgent medical and food supplies to Gaza.
"The situation for the people of Gaza is catastrophic," she said.
"Civilians killed by the thousands, people starving, children going without food and medical supplies, schools, hospitals and homes destroyed."
Australia has contributed more than $110 million in humanitarian assistance for civilians affected by conflict in Gaza and Lebanon since Hamas' October 7 attack on Israel in 2023.
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