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The US and other nations are seeking to salvage the months-long push for a Gaza ceasefire, after talks were left in tatters following the killing of Hamas's political leader, Ismail Haniyeh.
Israel is presumed to be behind the strike on Mr Haniyeh in Tehran early on Wednesday.
Israel has not commented but had previously vowed to target Mr Haniyeh and other Hamas leaders after the attack on southern Israel on October 7.
US Secretary of State Antony Blinken distanced himself from the fatal strike, after Hamas said the US had given the Israelis approval to conduct the operation.
“This is something we were not aware of or involved in,” Mr Blinken said while on a trip to Asia.
He declined to speculate about the impact on ceasefire talks but said “the imperative of getting a ceasefire, the importance that that has for everyone, remains.”
Mr Haniyeh had been leading negotiations for Hamas for a ceasefire and hostage-release deal in talks that have been inching along in Doha for months.
His killing could prompt Hamas to pull out of those talks, which Mr Blinken recently said had almost reached their goal.
The assassination is likely to further complicate the situation between Israel and Hamas ally Hezbollah in Lebanon.
Tension was already at boiling point after Israel on Tuesday struck a Beirut suburb, targeting Fouad Shukr, also known as Hajj Mohsen, the head of Hezbollah's military operations.
Israel has confirmed it carried out that attack.
A senior Hamas official, Khalil Al Hayya, told journalists in Iran that whoever replaces Mr Haniyeh will “follow the same vision” regarding negotiations to end the war – and continue in the same policy of resistance against Israel.
In a statement on his official website, Ayatollah Ali Khamenei, Iranian supreme leader, said revenge was “our duty” and that Israel had “prepared a harsh punishment for itself” by killing “a dear guest in our home”.
The White House expressed concern over the future of ceasefire talks after the strike.
"We're obviously concerned about escalation," National Security Council spokesman John Kirby told reporters.
"It was always complicated. It it remains complicated ... and it's not like the complications, with every passing day, get easier, and that includes today."
Joost Hiltermann, Middle East and North Africa programme director at the International Crisis Group, said if the US wants talks to succeed it must put more pressure on Israeli Prime Minister Benjamin Netanyahu.
But Mr Netanyahu is “clearly not aiming for these talks to succeed”, Mr Hiltermann told The National.
“At different times in the negotiations, you could blame Israel or Hamas but at this point, it's clearly Israel,” he added.
Applying more pressure is the only thing the US needs to do, he said, but it probably will not.
“Are they prepared to do it? You know, three months out of the election? I don't think so.”
In Qatar, meanwhile, UK Defence Secretary John Healey urged all sides to “step back from conflict and step up diplomacy” amid what he called “unbearable” loss of life in recent weeks and months.
British Foreign Secretary David Lammy and Mr Healey met Emir Sheikh Tamim in Doha on Wednesday.
Mr Lammy emphasised the important role played by Qatar as an interlocutor for negotiations. Whitehall sources told The National that the British were pushing hard on the “continued need for efforts to find way to an immediate ceasefire” in Gaza.
The trip was designed to “reinforce the message of de-escalation” between Hamas and Israel.
“It is absolutely vital that we engage closely with partners like Qatar, who play a key role in mediating the conflict in Gaza, so that we can bring this devastating war to an end,” said Mr Lammy.
Ali Vaez, who leads the Iran Project at the International Crisis Group, said Wednesday's killing was a “brazen and a major escalation”.
“It is highly, highly humiliating for the [Islamic] Revolutionary Guard [Corps] and the Iranian leadership, and I think puts them in an impossible dilemma,” he said.
“They feel compelled to respond otherwise, they would lose face and credibility. If they do respond, they risk stumbling into a conflict that they've done everything in their power since October 7 to avoid.”
Aaron David Miller, a long-time Middle East analyst at the State Department who retired in 2003, had a grim outlook for what comes next.
“Here's what the future is: a grinding, seemingly endless war of attrition between Israel and Hamas, because there is no solution to that problem that the Israelis or Hamas are prepared to accept,” he told The National.
“That's where we're going. Controlled but grinding escalation which drags on and on and on without resolution, because Israel has no solution to Gaza.”
Thomas Harding in London contributed to this report
Hamas leader Ismail Haniyeh – in pictures
