Dozens of missiles were fired by Iran into Israel in retaliation for the death of Hezbollah's leader, with Israel's Prime Minister Benjamin Netanyahu vowing retaliation.
Workplace Minister Murray Watt said the federal government had "unreservedly" condemned Iran's actions, reiterating calls for a ceasefire in the region.
Missiles launched from Iran towards Israel streak across the night sky. (AP PHOTO)
"This is obviously an extremely dangerous escalation that we've seen overnight," he told ABC Radio on Wednesday.
"The Australian government's position is that we need to see immediate de-escalation of the conflict in and around Lebanon."
Tensions had also threatened to escalate after Israel launched military action into Lebanon.
Senator Watt said citizens in affected countries would be caught up in the conflict.
"It's not in anyone's interest, whether it be Israel or its neighbouring countries for this conflict to go on, to continue to see civilian deaths on both sides of the border," he said.
"We're determined to work with the international community to bring that to an end."
Deputy opposition leader Sussan Ley called for the federal government to stand alongside Israel following the latest missile attacks.
"It's very important that Australia stands with our allies in support of Israel, this only democracy in the Middle East, and it's under attack," she told Sky News.
"I want to hear strong condemnation, and I want to hear a strong response from our government to that continuing unacceptable situation of hostages being held and action that can be taken."
The latest escalation comes as NSW Police have decided to go to court to block planned protests in Sydney that would coincide with the October 7 attack by Hamas against Israel.
In a statement on Tuesday, NSW Police said it could not be satisfied the rallies set down for Sunday and Monday could proceed safely following negotiations with organisers.
NSW Police Commissioner Karen Webb has decided to challenge the protests in court. (Dan Himbrechts/AAP PHOTOS)
"Accordingly, the commissioner has decided to apply to the NSW Supreme Court to prohibit the two assemblies.
"NSW Police recognises and supports the rights of individuals and groups to exercise their rights of free speech and peaceful assembly; however, the first priority ... is the safety of the participants and the wider community."
Ms Ley said the protests should be cancelled.
"It is sickening, and it's a vile reflection on the individuals concerned that they would choose to march on such an occasion," she said
"It's always a difficult issue for the police, but court orders need to be sought, and I don't think anyone in law enforcement wants to see these protests go ahead."
Senator Watt said while a decision on allowing the protest to go ahead was on state governments and police, people should not "celebrate" the anniversary.
It was "an appalling terrorist incident" that cost many lives, he said.
More than 1200 Israelis were killed in the Hamas attack, with hundreds taken hostage.
Almost 42,000 Palestinians have been killed in Gaza since Israel declared war on Hamas, according to local authorities.
The Australian government has for months warned citizens to leave Lebanon as  the security situation there continues to deteriorate.
A number of commercial airlines have since suspended flights to Israel and Lebanon to avoid affected airspace.
These include Emirates, Qatar, Lufthansa and Ryanair.
Foreign Minister Penny Wong has told Australians to leave by any available option, warning any evacuation plans cannot cater to the large number of citizens in Lebanon.
Senator Watt said Australians were assisted onto flights out of Lebanon on Tuesday, with more planned for Thursday.
"We are doing everything we possibly can to get Australians onto flights, and we're working with a number of international partners to do that," he said.
Lifeline 13 11 14
beyondblue 1300 22 4636
