Cloud iridescence or irisation is a colorful optical phenomenon that occurs in a cloud and appears in the general proximity of the Sun or Moon. The colors resemble those seen in soap bubbles and oil on a water surface. It is a type of photometeor.

This fairly common phenomenon is most often observed in altocumulus, cirrocumulus, lenticular, and cirrus clouds.

They sometimes appear as bands parallel to the edge of the clouds.

Iridescence is also seen in the much rarer polar stratospheric clouds, also called nacreous clouds.

When appearing near the Sun, the effect can be difficult to spot as it is drowned in the Sun’s glare.

Iridescent clouds are a diffraction phenomenon caused by small water droplets or small ice crystals individually scattering light.

Source: wikipedia