Israel has made a decision to respond to the Iranian drone and ballistic missile attack, Lord Cameron has said, in the starkest warning yet that the regional conflict will probably escalate further.

“It’s clear the Israelis are making a decision to act,” said Lord Cameron during a visit to Israel on Wednesday. “We hope they do so in a way that does as little to escalate this as possible.”

Iran launched more than 300 missiles and drones at Israel on Saturday, marking the first time Tehran has directly attacked their foe after decades of confrontation by proxies.

Most missiles and drones were shot down – aided in part by allies including the United States and Britain – and no deaths were recorded.

Nonetheless, Israel has vowed a “response” to the attack, and its military spokesman Daniel Hagari has stressed that Iran would not get off “scot-free”.

World leaders have spent the past four days urging both Israel and Iran to show restraint, fearing a wider conflict in the Middle East.

“We’re very anxious to avoid escalation and to say to our friends in Israel: It’s a time to think with head as well as heart, and in many ways this is a double defeat for Iran,” said Lord Cameron.

“Not only was their attack an almost total failure, but also the rest of the world can now see what a malign influence they are in the region.”

Iran said that it launched the attacks in response to a presumed Israeli airstrike on its embassy compound in Damascus on April 1, which killed two generals and several other Iranian officers.

On Wednesday, Ebrahim Raisi, the Iranian president, said that the slightest aggression by Israel on Iran’s soil would trigger a “fierce and severe response”.

Washington and other Western governments hope that new economic sanctions against Iran will help persuade Israel to limit the scope of its retaliation.

Lord Cameron said that Britain wanted to see coordinated sanctions against Iran by the G7, which is meeting this week in Italy.

“They need to be given a clear unequivocal message by the G7,” he said.

Earlier on Wednesday, the US said that it would impose new sanctions targeting Iran’s missile and drone programme, its Islamic Revolutionary Guard Corps and the Iranian defence ministry.

Josep Borrell, the EU’s foreign policy chief, also said that Brussels was working on expanding sanctions.

Isaac Herzog, the Israeli president, thanked Lord Cameron for his visit, saying: “I appreciate our warm discussion together this morning in Jerusalem.”

He added that Israel is “unequivocal” in its commitment to defending its people.