Prime Minister Scott Morrison says Australia is urging restraint and de-escalation in the Middle East following a US air strike that killed Iran's most prominent military commander.
Tehran is vowing vengeance following Friday's strike on Qassem Soleimani in the Iraqi capital Baghdad.
Mr Morrison told reporters in Canberra on Saturday that Australia's goal remained a "united and stable Iraq".
He said the government had been aware of the concerns the US had "in relation to some practices by Iranians for some time".
"But what we are pursuing is restraint and a de-escalation of the situation and staying in constant contact with our partners over this issue as well as ensuring the protection of those Australians who find themselves in that region."
Mr Morrison said Australia had around 280 defence force personnel in Iraq as well as diplomatic staff and others, with force protection always under constant reassessment.
"Our embassy in Baghdad has moved to a very heightened sense of security and is effectively in lockdown and that is the appropriate response I think given the security situation."
Soleimani, 62, headed Iran's overseas arm of the Revolutionary Guards and was regarded as the second most powerful figure after Supreme Leader Ayatollah Ali Khamenei.
The overnight attack that killed him was authorised by US President Donald Trump.