The S&P/ASX200 rose 113.1 points on Wednesday, up 1.3 per cent, to 8,793.6, as the broader All Ordinaries gained 112.8 points, or 1.27 per cent, to 9,016.1.
Investors rejoiced after US President Donald Trump paused his plan to escort ships stranded in the Hormuz Strait, claiming the US and Iran were progressing towards a peace deal.
Local blue chip stocks led the push higher, hinting at an institutional rotation of funds into Australia's exchange, which has underperformed many of its global counterparts since the US-Iran conflict began on February 28.
"Looking at the market map today, the big performers are all the index heavyweights, so it looks like broad-based buying of the Australian share market," Moomoo market strategist Michael McCarthy told AAP.
"We've been under pressure, and I think local investors have behaved rationally in that they sought a higher risk premium with lower share prices due to the geopolitical conflict."
Financials and basic materials provided much of the bourse's momentum, the two heavily-weighted sectors each charging more than 2.4 per cent higher.
Industrials also soared, up 1.1 per cent on the back of strong performances from Transurban, Qantas, Virgin, and Stokes family-controlled SGH.
The big four banks locked in gains of 2.8 per cent or more, with Westpac jumping 3.5 per cent to $38.94, scratching out Tuesday's post-earnings sell-off.
After some mixed interim results from ANZ, Westpac and NAB, CommBank will deliver its third quarter report next week.
Iron ore giants BHP, Rio Tinto and Fortescue helped boost the materials segment, as iron ore futures hit 19-month highs of $US110.50 a tonne.
The All Ordinaries gold sub-sector rose 1.2 per cent, overcoming a shaky start as the precious metal advanced to $US4,665 ($A6,439) an ounce.
The safe haven had been under pressure in March and April, with inflation expectations from the Persian Gold conflict dimming the outlook for US interest rate cuts.
Energy stocks underperformed the market, the sector losing two per cent as falling oil prices prompted some profit-taking on Woodside and Santos.
Investors also hit the sell button on coal miners and uranium stocks.
Defensive segments like consumer staples and communications plays were also under pressure, dropping roughly 0.9 per cent each.
Consumer discretionaries fell despite a decent uptick in Bunnings owner Wesfarmers, as JB Hi-Fi tumbled more than six per cent after its sales update warned of higher supplier costs and stock shortages.
The Australian dollar is trading at nearly four-year highs against the greenback, buying 72.49 US cents and up from 71.57 US cents on Tuesday at 5pm.
ON THE ASX:
* The S&P/ASX200 jumped 113.1 points, or 1.3 per cent, to 8,793.6
* The broader All Ordinaries fell 112.8 points, or 1.27 per cent, to 9,016.1
One Australian dollar trades for:
* 72.49 US cents, from 71.44 US cents at 5pm AEST on Tuesday
* 113.37 Japanese yen, from 112.32 Japanese yen
* 61.78 euro cents, from 61.13 euro cents
* 53.34 British pence, from 52.78 British pence
* 121.79 NZ cents, from 121.61 NZ cents
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