By Timour Azhari and Ari Rabinovitch
BEIRUT/JERUSALEM (Reuters) -The U.S. is discussing strikes on Iran's oil facilities as retaliation for Tehran's missile attack on Israel, President Joe Biden said on Thursday, while Israel's military pressed ahead with its campaign against Iran-backed armed group Hezbollah in Lebanon.
As Israel weighs its options after its arch-foe Iran launched its largest ever assault on Tuesday, Biden was asked whether he would support Israel striking Iran's oil facilities.
"We're discussing that," Biden told reporters.
His comments contributed to a surge in global oil prices, and rising Middle East tensions have made traders worry about potential supply disruptions.
"There is nothing going to happen today," Biden said. On Wednesday, the president said he would not support any Israeli strike on Iran's nuclear sites.
Israel's U.N. Ambassador Danny Danon told CNN on Thursday his country has "a lot of options" for retaliation and would show Tehran its strength "soon".
A U.S. official said Washington does not believe Israel has decided yet how to respond to Iran.
Israeli Prime Minister Benjamin Netanyahu has vowed Iran will pay for Tuesday's missile attack, and Washington said it would work with its longtime ally to ensure Iran faced "severe consequences."
Iranian President Masoud Pezeshkian, speaking in Doha, said on Thursday that Tehran would be ready to respond.
"Any type of military attack, terrorist act or crossing our red lines will be met with a decisive response by our armed forces," he said.
G7 CALLS FOR RESTRAINT
Israel's military told residents of more than 20 towns in south Lebanon to evacuate their homes immediately on Thursday as it pressed on with a cross-border incursion and struck Hezbollah targets in a suburb of Beirut.
The latest warnings took the number of southern towns subject to evacuation calls to 70 and included the provincial capital Nabatieh, suggesting another Israeli military operation was imminent against the Iran-backed armed group.
Hezbollah also carried out new strikes, targeting what it called Israel's "Sakhnin base" for military industries in Haifa Bay on the Mediterranean coast of northern Israel with a salvo of rockets.
Warning sirens sounded there again late on Thursday, as well as in the northern Israeli area of Galilee, and 10 projectiles crossed into Israel from Lebanon, Israel's military said. They were either intercepted or allowed to fall in open areas.
Israel, which has been fighting Hamas in the Palestinian territory of Gaza for almost a year, sent troops into southern Lebanon on Tuesday after two weeks of intense airstrikes in a worsening conflict that has drawn in Iran and risks involving the United States.
The Group of Seven nations, which includes the U.S., Britain and allies, on Thursday condemned Iran's missile attack and reaffirmed a commitment to Israel's security.
But the group also called for restraint, a ceasefire in Gaza and halt to hostilities in Lebanon.
"A dangerous cycle of attacks and retaliation risks fuelling uncontrollable escalation in the Middle East, which is in no one's interest," the group said in a statement.
Qatar's Emir Sheikh Tamim bin Hamad Al-Thani also urged serious ceasefire efforts to stop what he called Israel's aggression.
HEZBOLLAH CLAIMS TO KILL 17 ISRAELI TROOPS
Israel says its operations in Lebanon seek to allow tens of thousands of its citizens to return home after evacuating from northern Israel by Hezbollah bombardments during the Gaza war.
More than 1.2 million Lebanese have been displaced by Israeli attacks, and nearly 2,000 people have been killed since the start of the Israeli attacks on Lebanon over the last year, most of them in the past two weeks, Lebanese authorities said.
Hezbollah says it has repelled several land operations by Israeli troops, including with ambushes and in direct clashes.
The group said it killed 17 Israeli military personnel in combat in southern Lebanon on Thursday, citing its field and security sources. Israeli forces did not comment on the claim.
Israel's military on Thursday reported the death of one soldier. On Wednesday it announced its deadliest day in a year of clashes with Hezbollah with the deaths of eight soldiers.
The Lebanese army said two soldiers were killed by Israeli strikes in separate incidents in south Lebanon on Thursday, one in an attack on a military post and another in a strike on a rescue mission with the Lebanese Red Cross.
The army said it returned fire when the military post was struck, a rare development for a force that has historically stayed on the sidelines of major conflict with Israel.
BEIRUT UNDER ATTACK
In Beirut's southern suburb known as Dahiye, a dense neighbourhood where Hezbollah holds sway, several explosions were heard on Thursday and large plumes of smoke were rising after heavy Israeli strikes.
Israel's military said it struck 15 Hezbollah targets in Beirut on Thursday, including weapons sites and intelligence targets.
Overnight, Israel bombed central Beirut in an attack the Lebanese health ministry said killed nine people. Reuters journalists reported a heavy blast after a building was targeted a few hundred meters from parliament, the closest an Israeli strike has come to the central downtown district.
The Lebanese border front opened after Hezbollah fired missiles at Israel a year ago in support of Hamas in its war with Israel in Gaza. Iran's other regional allies - Yemen's Houthis and armed groups in Iraq - have also launched attacks in the region in support of Hamas.
(Reporting by James Mackenzie and Steven Scheer in Jerusalem; Maya Gebeily and Timour Azhari in Beirut; Parisa Hafezi in Istanbul; Phil Stewart, Jeff Mason, Andrea Shalal and Idrees Ali in Washington; Michelle Nichols in New York; Adam Makary, Jaidaa Taha and Enas Alashray in Cairo; Tala Ramadan, Jana Choukeir and Jack Kim in Seoul; Matthias Williams in Berlin; Maha El Dahan, Pesha Magid, Elwely Elwelly, Parisa Hafezi and Clauda Tanios in Dubai and Angelo Amante and Giuseppe Fonte in Rome; Writing by Michael Georgy, Timothy Heritage and Cynthia Osterman; Editing by Sharon Singleton, Philippa Fletcher, Angus MacSwan, Deepa Babington and Daniel Wallis)
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