Resolution:
Error: AESDKJ-0000 java.lang.UnsupportedOperationException: Java Runtime Environment (JRE) version 1.7 is not supported by this driver. Use the sqljdbc4.jar class library, which provides support for JDBC 4.0.

The issue is with the class loading of JDBC JARs that are present in either the classpath (manually added entry) or the tpcl directory (/<tibco_home>/tpcl/<version>/jdbc/). If there are two JAR files present, that means an older JAR (sqljdbc.jar) as well as a newer JAR (sqljdbc4.jar) are being loaded. If your domain is DB based and is having such a scenario of class loading, then it will throw errors like the one mentioned above while creating a domain through domainutility. Make sure you only have the one JAR file for JDBC connection and that it be the latest one. If you have faced such issue, then verify your classpath and tpcl directory. Remove the spare JAR from the classpath. You will then be able to connect to the database. You can use the following property to check the class/JAR loading. Add the following property in the designer.tra file if you are executing it from Designer. If not executing from Designer add the property in a domainutility.tra file.

java.extended.properties = -verbose:Class

Error: AESDKJ-0000 java.lang.UnsupportedOperationException: Java Runtime Environment (JRE) version 1.7 is not supported by this driver.