Israeli Defence Minister Yoav Gallant on Sunday vowed to "hit the enemy hard" after rocket fire from Lebanon killed 12 young people in the Israeli-annexed Golan Heights and again raised fears that the war in Gaza will spread.
Iran warned Israel any new military "adventures" in Lebanon could lead to "unforeseen consequences".
Israel's army called it "the deadliest attack on Israeli civilians" since the October 7 attack that began the war in Gaza and triggered regular exchanges of fire across the Lebanese border.
Israel blamed Lebanon's Hezbollah movement for the rocket fire but the Iran-backed group -- which has regularly targeted Israeli military positions -- said it had "no connection" to the incident.
It came hours after officials in Hamas-run Gaza said an Israeli strike on a school housing thousands of displaced Palestinians killed at least 30 people. Israel said it was targeting "terrorists" operating from the school.
The rocket fire in Majdal Shams prompted Prime Minister Benjamin Netanyahu to return early from the United States to convene his security cabinet.
"Israel will not let this murderous attack go unanswered and Hezbollah will pay a heavy price for it, a price it has not paid before," Netanyahu said.
The Israeli foreign ministry said Hezbollah had "crossed all red lines".
Israel's military said later Sunday it hit Hezbollah targets "both deep inside Lebanese territory and in southern Lebanon".
An Israeli drone fired two missiles at the village of Taraiyya in eastern Lebanon, destroying a hanger and a home without causing casualties, a Lebanese security source told AFP.
Hezbollah has said its cross-border fire is an act of support for Palestinian Islamists from Hamas who have been fighting Israel' military since October 7 when they attacked southern Israel.
That attack resulted in the deaths of 1,197 people in Israel, mostly civilians, according to an AFP tally based on official Israeli figures.
Militants also seized 251 hostages, 111 of whom are still held captive in Gaza, including 39 the military says are dead.
Israel's retaliatory military campaign in Gaza has killed at least 39,258 people, according to the health ministry in the Hamas-run territory, which does not provide details on civilian and militant deaths.
The rocket strike on the Druze town of Majdal Shams hit a football pitch and killed young people aged 10 to 20, Israel's military said.
Gallant visited the scene early Sunday, standing with security forces beside the mangled fence and abandoned scooters.
In the wake of the strike, an AFP photographer saw medics carrying casualties on stretchers at the scene, where dozens of residents had gathered.
Intensifying exchanges of fire "could ignite a wider conflagration that would engulf the entire region in a catastrophe beyond belief," they said.
The United States National Security Council condemned what it described as a "horrific attack" in Majdal Shams.
The rocket fire on Majdal Shams came after an Israeli strike killed four Hezbollah fighters in south Lebanon, prompting the militant group to announce a flurry of retaliatory rocket attacks against the Golan and northern Israel.
Lebanon's government called for "an immediate cessation of hostilities on all fronts".
Rhetoric on both sides escalated once again following the rocket strike.
"Any ignorant action of the Zionist regime can lead to the broadening of the scope of instability, insecurity and war in the region," said Iran's foreign ministry spokesman Nasser Kanani.
Israel's Foreign Ministry called the incident in Majdal Shams a "massacre" that "constitutes the crossing of all red lines by Hezbollah" which the ministry accused of deliberately targeting civilians.
Majdal Shams is a Druze town where many residents have not accepted Israeli nationality since Israel seized the Golan Heights from Syria in 1967. Druze traditionally follow an offshoot of Shiite Islam.
The violence since October has killed at least 527 people in Lebanon, according to an AFP tally. Most of the dead have been fighters but the toll includes at least 104 civilians.
On the Israeli side, 18 soldiers and 24 civilians have been killed, according to Israeli authorities.
Tens of thousands of residents have been displaced from the border areas in both southern Lebanon and northern Israel.
In a speech to the United States Congress on Wednesday, Netanyahu said Israel will do "whatever it must" to secure its northern border.
Hezbollah chief Hassan Nasrallah said this month that if a ceasefire is reached in Gaza his movement would stop cross-border attacks.
In central Gaza, the school strike on Saturday was at least the eighth on a school since July 6.
It prompted European Union foreign affairs chief Josep Borrell to call for a "political solution" to end the "madness" in Gaza, while Irish Prime Minister Simon Harris said: "Targeting an area populated with displaced families is inhumane and despicable."
Further south in the Khan Yunis city area, around 170 people have been killed "and hundreds wounded" in an Israeli operation since Monday, Gaza's civil defence agency said.
