As speculation grows that the US is preparing to enter the conflict, more than 1000 Australians have registered with the Department of Foreign Affairs and Trade for help to leave Israel.
A further 870 Australians and family members want to leave Iran, after the conflict began on Friday as Israel tries to wipe out Iran's nuclear and ballistic missile programs.
Treasurer Jim Chalmers said the Labor government was examining its options, but evacuations were proving difficult due to airspace being closed.
"We're obviously working very closely with those Australians via the Department of Foreign Affairs and Trade," he told ABC Radio on Wednesday.
"We're monitoring developments in that very dangerous part of the world very closely.
"Our major focus is on the human cost of this escalating conflict, there are economic costs as well, we're monitoring both of those things."
The treasurer said Australia and other countries were examining President Donald Trump's statement about the conflict.
Mr Trump met with his national security council on Wednesday morning, Australian time, after claiming he knew where Iran's Supreme Leader Ayatollah Ali Khamenei was hiding.
The president has demanded Iran to unconditionally surrender.
"The US president has signalled that he wants a deal. I think there's a broad, there is broad international support for a return to dialogue and diplomacy," Dr Chalmers said.
"It's a perilous place the Middle East right now, it's a perilous time for the global economy."
The situation in the Middle East has caused uncertainty for the Iranian community in Australia watching the destruction of their country.
Atefeh, who fled Iran and sought asylum in Australia more than a decade ago, has been worried sick about her family and friends left in capital Tehran.
Her niece has sent photos of rising smoke plumes, from her viewpoint out a window of their family home.
"We're the only ones here, my husband and two kids, and we can't do anything for them," 40-year-old Atefeh, whose surname has been withheld out of concern for her family's safety, told AAP.
"It's so stressful, we don't know what's going to happen them.
"It doesn't matter where you live, downtown or elsewhere, government facilities are everywhere and they're being attacked."
One of her relatives survived an Israeli attack on a government building he worked in due to being on annual leave, she said.
Another relative is in the thick of turmoil, working as a firefighter on the front line.
She and her husband are agonisingly close to receiving their Australian citizenship after spending years in immigration detention centres, followed by bridging visas and then permanent protection visas.
For her husband, a member of Afghanistan's Hazara minority long discriminated against because of their ethnicity and religion, watching the decimation of infrastructure under the weight of Israeli bombs is doubly hard.
"When the Taliban came they went to Iran and now in Iran the situation is very difficult at the moment so they can't feel safe."
She said even though many Iranians are against the hardline government, it does not justify Israeli aggression.
"We don't want innocent people killed, hospitals hit, children dying ... this is a war between governments and ordinary people are in the middle."
Iranian officials have reported 224 deaths, mostly civilians, while Israel said 24 civilians had been killed.
Israel launched its air war after saying it had concluded that Iran, which has long threatened the state, was on the verge of developing a nuclear weapon.
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