Iran has launched a missile at Israel that scattered small bombs with the aim of increasing civilian casualties, the Israeli military and its Washington embassy say, the first reported use of cluster munitions in the escalating seven-day-old war.

"Today, the Iranian Armed Forces fired a missile that contained cluster submunitions at a densely populated civilian area in Israel," the embassy said in an email that did not identify the area.

"Cluster weapons are designed to disperse over a large area and maximize the chances of a harmful strike," the email continued.

"Iran unlawfully fired deliberately at civilian population centres, and seeks to maximise the damage to civilians in them by using wide-dispersal munitions."

Iran’s mission to the United Nations did not immediately respond to a request for comment.

The use of a cluster bomb would be a clear sign of escalation, with no sign yet of an exit strategy from either side.

US President Donald Trump, who has kept the world guessing about whether the United States might join the war on Israel's side, said he would make a decision within the next two weeks.

White House says Trump will decide within 2 weeks whether to strike Iran. – AP

"Based on the fact that there's a substantial chance of negotiations that may or may not take place with Iran in the near future, I will make my decision whether or not to go within the next two weeks," press secretary Karoline Leavitt told reporters, quoting a message from the president.

As president, Trump has commonly used "two weeks" as a timeframe for making decisions, meaning it may not be a firm deadline.

"Iran has all that it needs to achieve a nuclear weapon," Leavitt said.

"All they need is a decision from the Supreme Leader to do that, and it would take a couple of weeks to complete the production of that weapon."

Israel launched a sweeping aerial campaign against Iran last week, calling it a preemptive strike to prevent Iran from developing nuclear weapons. Iran has denied plans to develop such weapons and retaliated by launching counterstrikes on Israel.

Israeli Prime Minister Benjamin Netanyahu said Tehran's "tyrants" would pay the "full price" for a strike that damaged the Soroka medical centre in Israel's southern city of Beersheba

"Are we targeting the downfall of the regime? That may be a result, but it's up to the Iranian people to rise for their freedom," Netanyahu said.

Israeli military spokesperson Brigadier General Effie Defrin accused Iran of deliberately targeting civilians in the hospital attack.

“That is state-sponsored terror and a blatant violation of international law," Defrin told a press briefing.Iran's Revolutionary Guards said they had targeted Israeli military and intelligence headquarters near the hospital. An Israeli military official denied there were military targets nearby.

Israel attacked the special forces headquarters of the internal security apparatus in Tehran over the past 24 hours, Defrin said. Earlier, Defence Minister Israel Katz said the military had been instructed to intensify strikes on strategic-related targets in Tehran in order to eliminate the threat to Israel and destabilise the "regime" of Supreme Leader Ayatollah Ali Khamenei.

As darkness fell, Iranian media reported air defences engaging "hostile targets" in northern Tehran.

Israel's airstrikes aim to do more than destroy Iran's nuclear centrifuges and missile capabilities. They seek to shatter the foundations of Khamenei's government and leave it near collapse, Israeli, Western and regional officials said.

Inside Israel's underground hospital facilities. – AP

Netanyahu wants Iran weakened enough to be forced into fundamental concessions on permanently abandoning its nuclear enrichment, its ballistic missile program and its support for militant groups across the region, the sources said.

Three diplomats said that Trump's special envoy Steve Witkoff and Iranian Foreign Minister Abbas Araqchi have spoken by phone several times since last week.

In an apparent reference to the US, Iran's Supreme National Security Council said it would use a different strategy if a "third party" joined Israel in the war.

With neither country backing down, the foreign ministers of Britain, France and Germany along with the European Union foreign policy chief were due to meet in Geneva with Iran's foreign minister to try to de-escalate the conflict on Friday.

"Now is the time to put a stop to the grave scenes in the Middle East and prevent a regional escalation that would benefit no one," said British Foreign Minister David Lammy ahead of their joint meeting with Abbas Araqchi, Iran's foreign minister.

Russian President Vladimir Putin and Chinese President Xi Jinping both condemned Israel and agreed that de-escalation is needed, the Kremlin said on Thursday.

The role of the United States, meanwhile, remained uncertain. On Thursday in Washington, Lammy met with US Secretary of State Marco Rubio and Witkoff, and said they discussed a possible deal.

Use of cluster bombs

Cluster bombs are controversial because they indiscriminately scatter submunitions, some of which can fail to explode and kill or injure long after a conflict ends.

The Israeli military released a graphic as a public warning of the dangers of unexploded ordnance.

“The terror regime seeks to harm civilians and even used weapons with wide dispersal in order to maximize the scope of the damage,” Israel's military spokesperson, Brigadier General Effie Defrin, told a briefing.

Daryl Kimball, executive director of the Arms Control Association advocacy group, said, "They are egregious weapons with their wide-area destruction, especially if used in a civilian populated area and could add to the unexploded ordnance left over from conflicts."

Firefighters work to put out fire after Israeli hospital hit by Iranian airstrike. – Reuters

Noting that Iranian missiles can be imprecise, he said that Tehran should know that cluster munitions "are going to hit civilian targets rather than military targets."

Iran and Israel declined to join a 2008 international ban on the production, stockpiling, transfer and use of cluster bombs that has been signed by 111 countries and 12 other entities.

Strikes on nuclear sites

Earlier, Israel said it had struck Iran's Natanz and Isfahan nuclear sites. It also targeted the partially built Arak heavy-water research reactor, also known as Khondab, in central Iran.

Airbus Defence satellite imagery published by the Open Source Centre, a London-based research group, showed a large, blackened hole in the roof of the Arak reactor and destroyed heavy water distillation towers nearby.

Heavy-water reactors produce plutonium, which, like enriched uranium, can be used to make the core of an atom bomb.

David Albright, a former UN nuclear inspector and head of the Institute for Science and International Security, said the Israelis hit the facility because of concerns about Iran’s declared intention to begin operating the reactor next year.

The Iranians "play all these different games so Israel took it out," he said.

A week of Israeli air and missile strikes has wiped out the top echelon of Iran's military command and killed hundreds of people. Iranian retaliatory strikes have killed at least two dozen civilians in Israel.

Iran's Revolutionary Guards said it had launched combined missile and drone attacks at military and industrial sites linked to Israel's defence industry in Haifa and Tel Aviv.

Iran has been weighing its wider options in responding to the biggest security challenge since its 1979 revolution. A member of the Iranian Parliament's National Security Committee Presidium, Behnam Saeedi, told the semi-official Mehr news agency Iran could consider closing the Strait of Hormuz, through which 20 per cent of daily global oil consumption passes.

'Stay away from our country' 

Israel, which has the most advanced military in the Middle East, has been fighting on several fronts since the October 7, 2023, attack on southern Israel by the Palestinian militant group Hamas triggered the Gaza war.

It has severely weakened Iran's regional allies, Hamas in Gaza and Lebanon's Hezbollah, and has bombed Yemen's Houthis.

The extent of the damage inside Iran has become more difficult to assess in recent days, with the authorities apparently seeking to prevent panic by limiting information.

Iranian state TV video purportedly shows missiles launched towards Israel. – Reuters

Iran has stopped giving updates on the death toll, and state media have ceased showing widespread images of destruction. The internet has been almost completely shut down, and the public has been banned from filming.

Arash, 33, a government employee in Tehran, said a building next to his home in Tehran’s Shahrak-e Gharb neighbourhood had been destroyed in the strikes.

"I saw at least three dead children and two women in that building. Is this how Netanyahu plans to ‘liberate’ Iranians? Stay away from our country," he said.