Iranian missiles struck Israel's Tel Aviv and the port city of Haifa before dawn on Monday, destroying homes and fuelling concerns among world leaders at this week's G7 meeting that the confrontation could lead to a broader regional conflict.

At least five people were killed in the latest Iranian strikes, the national emergency service said, raising Israel's death toll to 18 since Friday. At least 100 more were wounded in the overnight blitz, part of a wave of attacks by Tehran in retaliation for Israel's pre-emptive strikes targeting the nuclear and ballistic missile programs of sworn enemy Iran.

Iran's Revolutionary Guards said the latest attack employed a new method that caused Israel's multi-layered defence systems to target each other and allowed Iran to successfully hit many targets.

The Israeli Defence Force did not immediately respond to a request for comment on the strikes. Israeli officials have repeatedly said its 'Iron Dome' defence system is not 100% and warned of tough days ahead.

Search and location operations were underway in Haifa where around 30 people were wounded, emergency authorities said, as dozens of first responders rushed to the strike zones. Fires were seen burning at a power plant near the port, media reported.

Video footage showed several missiles over Tel Aviv and explosions could be heard there and over Jerusalem. Several residential buildings in a densely populated neighbourhood of Tel Aviv were destroyed in a strike that blew out the windows of hotels and other nearby homes just a few hundred meters from the US Embassy branch in the city. The US ambassador said the building sustained minor damage, but there were no injuries to personnel.

The predawn missiles also struck near Shuk HaCarmel, a popular market in Tel Aviv that typically draws large crowds of residents and tourists buying fresh fruits and vegetables, and to popular bars and restaurants. A residential street in nearby Petah Tikva and a school in ultra-Orthodox Jewish city Bnei Brak were also hit.

'The arrogant dictator of Tehran has become a cowardly murderer who targets the civilian home front in Israel to deter the IDF from continuing the attack that is collapsing his capabilities,' Defence Minister Israel Katz said in a statement. 'The residents of Tehran will pay the price, and soon.'

Meanwhile, the death toll in Iran was already at least 224, with 90% of the casualties reported to be civilians, an Iranian health ministry spokesperson said. Israel's military said on Monday morning it had struck again at command centres belonging to the Revolutionary Guard and Iran's military.

Leaders meet

Group of Seven leaders began gathering in the Canadian Rockies on Sunday with the Israel-Iran conflict expected to be a top priority. German Chancellor Friedrich Merz said his goals for the summit include for Iran to not develop or possess nuclear weapons, ensuring Israel's right to defend itself, avoiding escalation of the conflict and creating room for diplomacy.

'This issue will be very high on the agenda of the G7 summit,' Merz told reporters. Before leaving for the summit on Sunday, US President Donald Trump was asked what he was doing to de-escalate the situation. 'I hope there's going to be a deal. I think it's time for a deal,' he told reporters. 'Sometimes they have to fight it out.'

Brent crude futures were up 0.5% in Asian trade on Monday, having surged late last week. While the spike in oil prices has investors on edge, stock and currency markets were little moved in Asia.

'It's more of an oil story than an equity story at this point,' said Jim Carroll, senior wealth adviser and portfolio manager at Ballast Rock Private Wealth. 'Stocks right now seem to be hanging on.'