Israeli missiles have hit a site in Iran, ABC News reported late on Thursday, citing a U.S. official.
Futures on the Dow Jones Industrial Average slid 443 points, or 1.17%. S&P 500 futures lost nearly 1.34%, and Nasdaq 100 futures were down 1.6%.
Oil jumped on intensifying concerns about conflict in the Middle East, with Brent rising above $89 a barrel in a sudden move higher.
Gold futures rose 1% to $2423.3 an ounce.
Iran's Fars news agency said explosion were heard at an airport in the Iranian city of Isafahan but the cause was not immediately known. Several flights were diverted over Iranian airspace, CNN reported.
Over the weekend, Iran launched hundreds of drones and missiles in a retaliatory strike after a suspected Israeli strike on its embassy compound in Syria.
Most of the drones and missiles were downed before reaching Israeli territory.
Iran told the United Nations Security Council on Thursday that Israel "must be compelled to stop any further military adventurism against our interests" as the U.N. secretary-general warned that the Middle East was in a "moment of maximum peril."
Israel had said it was going to retaliate against Iran's April 13 missile and drone attack.
Analysts and observers have been raising concerns about the risks of the Israel-Gaza war, opens new tab spreading into the rest of the region.
Israel's assault on Gaza began after Palestinian Islamist group Hamas attacked Israel on Oct. 7, killing 1,200, according to Israeli tallies. Israel's military offensive has killed over 33,000 Palestinians in Gaza, according to the local health ministry.
Iran-backed groups have declared support for Palestinians, launching attacks from Lebanon, Yemen and Iraq.