Israel and Iran: All-out war, or measured retaliation?

• Iranian media reported three drones shot down over the central city of Isfahan, while Israel's government has not commented. 
• The region has been on edge, awaiting an Israeli reprisal after Iran sent more than 300 missiles and drones into the Jewish state on Sunday – the first ever direct Iranian attack into Israeli territory.
• Israel had vowed to "exact a price" from Iran, dismissing calls by Western allies for restraint.
• A full-blown Israel-Iran war would be devastating to both sides and highly destabilizing for the Middle East. 

Iran and Israel, regional arch-foes, are trading attacks and threats — the latest of which saw Israel launch a "limited military strike" on Iran in the early hours of Friday morning, a source familiar with the situation told NBC News. 

Iranian media reported three drones were shot down over the central city of Isfahan, while Israel's government has not commented. 

The region has been on edge, awaiting an Israeli reprisal after Iran sent more than 300 missiles and drones into the Jewish state at the weekend – the first ever direct Iranian attack into Israeli territory – which was largely intercepted by Israel's air defenses and caused no deaths. Tehran said the strikes were in retaliation for Israel's bombing of an Iranian diplomatic compound on April 1 that killed two senior Iranian generals, among others. 

Markets immediately reacted to the latest attacks, with oil prices jumping more than 3% in early Asian trading and U.S. stock futures falling on fears of wider Middle East war. 

Locked in a decades-long regional proxy war, Israel-Iran tensions have soared over the course of the bloody Israel-Hamas war in Gaza, now in its seventh month. Iranian-backed militant groups including Lebanon's