TEHRAN / JERUSALEM / DUBAI: Reports of overnight explosions in Isfahan that were termed an Israeli strike on Iran caused an initial flurry of activity on Friday, with the markets reacting sharply, airlines cancelling flights in the region and world leaders going into crisiscontrol mode.

But the limited scale of the so-called attack and the muted response from both Tehran and Tel Aviv who have not shied away from ramping up the rhetoric in the past indicated that there was no will on either side to further escalate the situation.

The apparent attack wasthe latest in a round of actions, set off by the killing of seven Iranian officers in an Israeli strike on an embassy compound in Damascus. Iran retaliated over the weekend with hundreds of drones and missiles, some of which aresaid to have reached targets inside Israel.

On Friday morning, US outlet ABC News reported Israeli strikes on Iran, while the Fars newsagency said an explosion was heard at an airport in Isfahan, but the cause was not immediately known.

Several Iranian nuclear sites are located in Isfahan province,includingNatanz, centerpiece of Iran`s uranium enrichment programme. But CNNguoted a US official as stating the target was not a nuclear facility, and the International Atomic Energy Agency also reported no damage to Iranian nuclear sites.

Israeli media also cited reports from the New York Times and the Washington Post, which quoted unnamed Israeli officials as confirming Israel was behind the attack,but did not report official confirmation of their own.

Israel has a long tradition of maintaining ambiguity over issues like nuclear weapons and intelligence operations and the silence appeared to be part of its messaging.

The Israeli military and foreign ministries declined comment and there were no immediate public statements from senior politicians apart from hardline security minister, Itamar Ben Gvir, who sent out the one word message `Feeble!` on social media platform X. In departure for a White House that routinely weighs in on the latest developments in the Middle East, spokesperson Karine Jean-Pierre said on Friday they had no comment on reports of Israeli attacks in Iran overnight.

But according to officials quoted by NBC and CNN, the US received advance notice of Israel`s reported strike on Iran, but did not endorse the operation or play any part in its execution.

Iran`s muted reponse Iranian media appeared to play down the significance of the strike.

In official statements, there was almost no mention that Israel or the `Zionist entity` as it is usuallycalled was behind it. State television carried analysts and other pundits who all appeared be dismissive about the scale.

`There has been a remarkable fabrication to exaggerate the extent of the incident,` the semi-official ISNA news agency said, with one analyst telling state TV that `mini drones shot down by air defences in Isfahan were flown by infiltrators from inside Iran`.

A senior Iranian official told Reuters there were no plans to respond against Israel for the incident.

`The foreign source of the incident has not been confirmed. We have not received any external attack, and the discussion leans more towards infiltration than attack,` the official said.

Even Iranian President EbrahimRaisi made no mention of the explosions, nor did he cut short his trip to the central province of Semnan, indicating that the country was not on high alert.

In comments made to the envoys of Muslim countries in New York, Iranian Foreign Minister Hossein Amirabdollahian said the drones caused no damage or casualties in Isfahan.

Iran`s army commander-in-chief Abdolrahim Mousavi attributed Friday`s explosions to `the firing of anti-aircraft defence systems on a suspicious object`. He said there was `no damage` and that investigations were underway to assess the scale of the incident, according to Tasnim news agency.

Iran`s space agency spokesman Hossein Dalirian, referring to a type of drone, said there was `afailed and humiliating attempt to fly quad-copters, which were shot down.` In a post on X, formerly Twitter, he denied Iran had been attacked from abroad.

Flurry of activity Confirmed or not, reports of the suspected Israeli strike on Iran sent markets, airlines and world leaders into a frenzy on Friday morning.

Prices of oil, gold and equities seesawed during the trading session, crude oil prices surged as much as four percent on worries about supplies from the oil-rich region before turning lower as it became apparent the strike was limited and neither side appeared eager to escalate.

The initial rush for safety also saw the yen rally against the dollarand gold jump back past $2,400 per ounce, while the Swiss franc and US government bonds won support.

They all later gave up much of those gains.

Asian equities bore the brunt of the shock of the news of the attack.

European equities recovered to end the day mixed, with Wall Street stocks also mixed in late morning trading.

Meanwhile, most major global airlines cancelled flights into Israel and other destinations in the Middle East, but by the end of the day, most Gulf-based carriers such as Qatar Airways, flydubai, Emirates, Etihad had resumed their operations.

Calls for calm Following the early morning reports of an Israeli strike, theinternational community sprung into action with a chorus of voices unanimous in their calls for de-escalation.

UN chief Antonio Guterres said it was `high time to stop the dangerous cycle of retaliation in the Middle East`, while European Commission President Ursula Von Der Leyen stressed the need for stability in the region.

British Prime Minister Rishi Sunak called for calm heads to prevail across the region, while German Chancellor Olaf Scholz said that deescalation remained the order of the day.

Following a meeting in Capri, G7 foreign ministers also issued a statement, saying: `We urge all parties to work to prevent further escalation. The G7 will continue to work to this end.`-Agencies