Near 1815 GMT, futures for West Texas Intermediate fell 6.5 percent to $69.96 a barrel, while Brent oil futures dropped 6.4 percent to $72.07 a barrel, its lowest level in 10 days.

A US defense official said there were no known American casualties from the incident, which analysts said did not appear to be near key oil infrastructure.

John Kilduff of Again Capital described the Iranian action as "somewhat measured" and apart from population centers.

"This is a face-saving measure by the Iranians and hopefully the diplomatic off-ramp will be taken," Kilduff said.

The Iran-Israel clash has focused worry on the Strait of Hormuz, a strategic waterway for seaborne oil that has long been used by Iran as a geopolitical bargaining chip.

Tehran has for decades threatened to close the strait every time tensions soared, but never acted on its warning.

But Kilduff said, "it's pretty clear that this is not going to turn into -- right away at least -- any kind of impact on oil flows in the region, particularly the Strait of Hormuz."