President Donald Trump revealed the US had struck three nuclear sites in Iran on Sunday through social media posts, explicitly aligning himself with Israel's campaign.
Prior to Mr Trump's announcement, Australian officials across the political spectrum had grown concerned about the rapidly intensifying situation.
"We are worried about the prospect for escalation here and this entering into some wider kind of conflict," Deputy Prime Minister Richard Marles told Sky News on Sunday.
"We've been urging dialogue and diplomacy and we continue to do that now."
At least 430 people have been killed and another 3500 injured in Iran according to Iranian media outlet Nour News, while local Israeli authorities have reported 24 civilian deaths and almost 1300 injuries.
Though he hoped Iran would negotiate and surrender its nuclear program, opposition spokesman for home affairs Andrew Hastie predicted a strike would occur, mere minutes before the US president made his announcement.
"I suspect diplomacy is probably going to fail here and we're going to see a strike of some sort," he told ABC's Insiders.
"The next two weeks is going to be tough for innocent people in Israel and Iran who are caught in the middle of this war.
"Iran needs to come to the table, or it's going to be a settlement by force and more people will die."
The federal government has repeatedly insisted Australia is not a central player in the conflict, which was triggered in mid June when the Israeli military launched attacks on Iran in what it claimed was a bid to wipe out Iran's nuclear program.
Australia has deployed defence assets to the region to assist in evacuation efforts, with Foreign Minister Penny Wong repeatedly maintaining they are not there to engage in combat.
Mr Hastie, a former Special Air Service Regiment troop commander during the war in Afghanistan, said he would be reluctant to send in troops and called for Australia to more clearly define its alliance with the US.
"I think we need to talk about operationalising the alliance - building guardrails for combat operations and of course, defining our sovereignty," he said.
"We're not just a vassal state, we're an ally and a partner."
Mr Marles maintained Iran's nuclear and ballistic missile program was "most definitely a threat" to the peace and stability of the world, while also expressing concern about the conflict's escalation.
"We recognise Israel's right to defend itself and we very much acknowledge the risk that the Iranian nuclear and ballistic missile program represents," he said.
But now that it appears the dominoes have begun to fall, the world could soon have to reckon with the consequences, Mr Hastie warned.
"I think it's very dangerous and risky," he said.
"We could see regime change, we could see a collapse of the Iranian regime, we'd see large scale migration and refugees across the world but particularly Europe."
About 2600 Australians in Iran are seeking assisted departures from the region, alongside about 1200 in Israel as the government urges travellers not to venture to either nation.
Staff from the Department of Foreign Affairs have evacuated the Tehran embassy and are helping Australians leave through the border in Azerbaijan.
Some Australians have already left through land crossings but the government is also poised to help citizens leave once the airspace over both nations re-opens.
With Reuters
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