TEL AVIV—Israel is inclined to punish Tehran for the drone and missile barrage that represented Iran’s first-ever direct attack on its territory, but it faces a difficult challenge of finding a way of doing so that avoids further escalation, preserves the partnership that helped fend off the assault and doesn’t derail its war aims in Gaza.

       Israel’s war cabinet was meeting Monday to discuss how and when to respond to Iran’s attack, which Tehran said was in response to the killing by Israel of a senior Iranian general at an Iranian diplomatic building in Damascus, Syria. Israel hasn’t confirmed or denied involvement.

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