There was a concern that the graphite (or lead) particles shed from the pencil from writing would find themselves in circuitry and short them out, thus potentially causing an electrical fire. I'm unaware of any problems that actually occurred due to pencils and believe they were still used extensively by all parties in addition to grease pencils (of which the paper is probably a bigger fire hazard!).
Honestly, the big reason why they wanted to use pens is because the ink is permanent and can't get smudged like pencils can. Thus, the Soviets bought a bunch of space pens, too.
