Israel and Hezbollah exchanged fire along the Lebanese border on Sunday after a week of rising tensions, but no casualties were reported following the brief flare-up and UN officials immediately urged restraint.
Israel said it responded with around 100 artillery shells after Hezbollah fired two or three anti-tank missiles at a battalion headquarters and military ambulance, hitting both.
Israeli officials refuted Hezbollah claims that it had killed and wounded those inside the military vehicle, saying there were no casualties.
"We are consulting about the next steps," Israeli Prime Minister Benjamin Netanyahu said.
"I have ordered that we be prepared for any scenario. We will decide on the next steps pending developments."
After the exchange of fire began, Lebanon's Prime Minister Saad Hariri contacted senior US and French officials to urge their countries and the international community to intervene.
The head of the UN peacekeeping force in Lebanon called for "maximum restraint."
Israeli military spokesman Jonathan Conricus told journalists that the "tactical event" near Avivim, an Israeli community near the Lebanese border, was most likely over.
But he said the "strategic situation is still ongoing", meaning tensions with Hezbollah remained.
Conricus said the Israeli response had targeted the squad that fired the missiles.
Hezbollah said in a statement its fighters had "destroyed a military vehicle on the road to the Avivim barracks, killing and wounding those inside."
Hezbollah-affiliated Al-Manar TV said that the group's attack targeted a Wolf armoured vehicle that can fit eight soldiers.
After the initial reports of fire from Lebanon, an Israeli military spokesman said Israelis living within four kilometres (2.5 miles) of the Lebanese border should remain at home and prepare shelters.
Conricus said later that there were no longer any special instructions for civilians.
Tensions have risen in the last week between Israel and its enemy Hezbollah, the Lebanese Shiite movement backed by Iran.
Hezbollah chief Hassan Nasrallah said Saturday the group had decided to respond to an alleged Israeli drone attack on the group's Beirut stronghold.
The pre-dawn August 25 attack involved two drones -- one exploded and caused damage to a Hezbollah-run media centre and another crashed without detonating due to technical failure.
Israel has not claimed responsibility for the incident.
The attack in Lebanon came just hours after Israel launched strikes in neighbouring Syria to prevent what it said was an impending Iranian drone attack on the Jewish state.
Hezbollah says two of its members were killed in that strike.
A source connected to Hezbollah called Sunday's missiles a response to those deaths. It said a response to the alleged drone attack would take place in the air, alluding to a confrontation with Israeli drones.
- 'CALM DOWN' -
Israel has carried out hundreds of strikes against what it says are Iranian and Hezbollah sites in Syria since the civil war began there in 2011.
It has pledged to prevent its main enemy Iran from entrenching itself militarily in neighbouring Syria.
Iran and Hezbollah, along with Russia, have backed Bashar al-Assad in the conflict.
But a drone attack by Israel inside Lebanon would mark a departure -- what Nasrallah had called the first such "hostile action" since a 2006 war between them.
That conflict took the lives of 1,200 Lebanese, mostly civilians, and more than 160 Israelis, mostly soldiers.
On Thursday, Israel accused Iran of collaborating with Hezbollah to build precision-guided missiles in Lebanon.
British paper The Times reported last week that the suspected Israeli drone attack targeted crates believed to contain machinery to mix high-grade propellant for precision missiles.
Sunday's escalation comes just over two weeks ahead of Israel's September 17 election.
Netanyahu is seen as wanting to avoid a major conflict before ahead of the vote, but he has also warned Lebanon and Hezbollah to "be careful".
Addressing Nasrallah, Netanyahu told a conference in Jerusalem on Tuesday that "he knows very well that the state of Israel knows how to defend itself well, and to repay its enemies".
He suggested that Nasrallah "calm down".
But while Nasrallah has issued warnings to Israel, Hezbollah's number two Naim Qassem in an interview with Russia Today last week played down talk of a "war atmosphere".
"The atmosphere is an atmosphere of response to an aggression," he said.
