South Africa's rand weakened in volatile trading early on Friday, as reports of an Israeli attack on Iran sapped risk sentiment and sent currency markets into a tailspin.

In the latest tit-for-tat exchange between the two arch-foes, Israel launched an attack on Iranian soil, sources told Reuters. Iranian state media reported that drones had been shot down.

The rand initially hit a near two-month low of 19.3800 to the dollar in a sell-off of risk assets as investors scurried towards safe-haven dollar and gold.

However, some calm returned to the markets after a senior Iranian official said Iran had no plan to strike back immediately.

"Diminished concern over a broader regional conflict, as Iran reported minimal damage to its infrastructure and confirmed no impact on its nuclear sites, contributed to the markets' partial recovery," said Andre Cilliers, currency strategist at TreasuryONE.

At 0802 GMT, the rand traded at 19.2300 against the dollar, down 0.38% from its previous close.

On the stock market, the Top-40 index and the broader all-share index were both trading in the red, about 0.7% weaker in early trade.

The dollar was last down 0.1% against a basket of currencies but still hovered near a five-month high.

Capital Economics chief economist Neil Shearing said Iran lifting flight restrictions may also have helped the markets.

"This might indicate that the attack was at the more moderate end of the spectrum," he said in a research note.