Iran and Israel have decided to step back from engaging in broader conflict as lawmakers in the United States approved new Israeli military aid on Saturday despite growing criticism of its ally over the continuing war in Gaza, media reports said.

Iran downplayed Israel's reported retaliation for its unprecedented drone and missile attack, tamping down fears that escalating attacks between the arch-enemies could result in a broader war in the Middle East.

However, a deadly blast at an Iraqi military base underlined the persisting tensions in the region.

To strengthen Israel's defence forces including its Iron Dome air defence system, the US House of Representatives approved $13 billion in new military aid for the country.

Israeli Prime Minister Benjamin Netanyahu welcomed the aid bill, writing on X, formerly Twitter, that it "demonstrates strong bipartisan support for Israel and defends Western civilization".

However, the move was criticised by the Palestinian presidency who condemned it as "an aggression against the Palestinian people" and a "dangerous escalation".

The money would "translate into thousands of Palestinian casualties in the Gaza Strip" and the West Bank, said Nabil Abu Rudeina, spokesman for Palestinian president Mahmud Abbas.

On Friday, Israel launched a missile strike on Iran after which Tehran claimed to have activated its air defence system and that it shot down several drones.

Israel launched a strike against Iran in retaliation for its attack last weekend.

Iran had activated its air defence system over several cities, state media reported, soon after the country's official broadcaster said explosions were heard near Isfahan, Iran's third-biggest city.