Iran launched explosive drones and fired missiles at Israel late on Saturday in retaliation for an attack on its embassy compound in Damascus, fuelling fears of a wider regional conflict bursting out of the Israel-Hamas war.

Italian Foreign Minister Antonio Tajani said fresh sanctions would need the backing of all the G7, which includes Italy, France, Germany, Canada, Japan, Britain and the United States. He also suggested that any new measures would be focused on individuals rather than whole nations.

"If we need to have more sanctions for people clearly engaged against Israel, supporting for example terrorism, supporting Hamas, it is possible to do it. But we need to be very serious and to work all together," Tajani told Reuters.

Tajani called the Iranian attack a "big mistake" for Tehran but "positive" for Israel as it had revealed the efficiency of its air defences that shot down most of the drones and missiles with help from the U.S., Britain, France and Jordan.

The G7 on Sunday condemned the attack and urged Tehran to exercise restraint, with the United States warning Israel that it would not take part in a counteroffensive.

"The message coming from Tehran on this, (is) going in the right direction. This is only one attack. Also the reaction of the Israeli government has been positive," said Tajani, speaking in English.

He had a phone call with his Iranian counterpart before the attack to urge caution.

"For us it is important to protect Italian soldiers" working in the area under the auspices of the United Nations, he said, adding that Iran-backed Houthis in Yemen had to stop attacks on ships in the Red Sea, which is vital to world trade.

Tajani also reiterated that Italy was firmly opposed to any Israeli invasion of the southern Gaza city of Rafah and repeated his call for a ceasefire, while also calling on Hamas to set free all the Israeli hostages it took during the Oct. 7 attack.

Ahead of a meeting of the G7 foreign ministers on April 17-19 on the Italian island of Capri, Tajani said an Israeli attack on Iran would only create more hurdles to restoring stability in the region.

"All together we want to protect Israel, but we want to achieve stability and peace," he said.

(Reporting by Angelo Amante and Crispian Balmer; Editing by Alex Richardson)

By Angelo Amante and Crispian Balmer