A funeral was expected Sunday for a man Palestinian officials say was killed by Israeli settlers in the occupied West Bank, where the murder of an Israeli teenager sparked a wave of violence.

After Benjamin Achimeir, a 14-year-old Israeli, was reported missing near Ramallah on Friday, hundreds of Jewish settlers backed by Israeli forces raided nearby Palestinian villages, torching cars and homes, and left at least two villager dead and dozens wounded.

Israel Sunday struck a Hezbollah site in Lebanon's east near the Syrian border, the Israeli army and a source from the Iran-backed group said, as tensions soared after Iran directly attacked Israel.

The Hezbollah source told AFP that "the Israeli strike targeted an area... near Baalbek and targeted a two-storey building belonging to Hezbollah," adding there were no casualties.

Lebanon's state-run National News Agency reported that "an enemy air strike targeted a building" in the village of Nabi Sheet and "destroyed it".

Iran on Sunday urged Israel not to retaliate militarily to an unprecedented attack overnight, which Tehran presented as a justified response to a deadly strike on its consulate building in Damascus.

"The matter can be deemed concluded," Iran's mission to the United Nations said in a post on social media platform X just a few hours after the start of the operation late Saturday.

"However, should the Israeli regime make another mistake, Iran's response will be considerably more severe," the Iranian mission warned.

Thousands of Iranians took to the streets of Iran early Sunday in a show of support for the unprecedented drone and missile attack under way against arch foe Israel.

"Death to Israel!" and "Death to America!" chanted demonstrators in Tehran's Palestine Square shortly after the Revolutionary Guards announced the launch of Operation Honest Promise.

A mural saying "the next slap is fiercer" was unveiled in the square where a huge banner has hung for days calling, in Hebrew, for Israelis to "take shelter".

Jerusalem residents took cover on Sunday as Iran launched an unprecedented drone and missile attack on Israel.

Blasts rang out across the city and explosions lit the skyline red, while residents stockpiled water and sought shelter in bunkers.

"As you can see it's empty, everybody is running home," said Eliyahu Barakat, a 49-year-old grocery shop owner in Jerusalem's Mamilla neighbourhood.

Barakat said many people visited his shop to stock up on supplies, "water, food, everything."

"Normally we close at one o'clock but we will stay open," he added.

President Joe Biden said US forces helped Israel shoot down nearly all the drones and missiles fired by Iran Saturday, but appeared to guide the key US ally away from retaliating against Tehran by saying Israel had now shown its strength.

Biden added that he was convening fellow G7 leaders on Sunday to coordinate a diplomatic response against Tehran, in another sign that he is trying to avoid any further military escalation that could ignite a wider Middle East conflict.

After three days off, people in Tehran returned to work as normal on Saturday, but with a lingering cloud of concern that soaring tensions between Iran and its arch foe Israel could tip over into war.

"I don't know who is at fault and who is not, but it is better to reach a compromise so that the war does not begin, and innocent people don't die," said Maryam, a 43-year-old private sector worker.

Like most Iranians, Maryam has been following the news about a stand-off between Iran and Israel since a strike hit Iran's consulate in Damascus on April 1.

Prime Minister Benjamin Netanyahu on Saturday condemned the "heinous murder" of an Israeli teenager in the occupied West Bank as attacks on Palestinian villages intensified following news of his death.

After Benjamin Achimeir, 14, was reported missing near Ramallah on Friday, hundreds of Jewish settlers backed by Israeli forces raided nearby Palestinian villages, torching cars and homes, and left at least one villager dead and dozens wounded.

World powers urged restraint on Sunday for fear that Iran's unprecedented missile and drone strikes on Israel could spark a wider war in the Middle East, as the United Nations heard a call for new sanctions against Tehran.

Iran launched the attack, its first ever to directly target Israeli territory, in retaliation for a deadly air strike widely blamed on Israel that destroyed Tehran's consular building in Syria's capital early this month.

The search for a missing Israeli teenager resumed Saturday in the occupied West Bank, where settler attacks on Palestinian villages have left at least one dead and dozens injured, sources on both sides said.

The Israeli army said it was still looking for Benjamin Achimeir, 14, who went missing early on Friday from Malachi Hashalom, an outpost near the city of Ramallah.

With tensions already high due to the Israel-Hamas war in the other Palestinian territory of Gaza, Israeli security forces and hundreds of volunteers formed a huge search party to look for the teen.