The S&P/ASX200 rose 38.4 points, or 0.44 per cent, to 8,731 by midday, as the broader All Ordinaries gained 36.8 points, or 0.41 per cent, to 8,961.
The tentative move followed a mixed session on Wall Street, as investors weighed fading hopes of an early end to the Middle East conflict and fears spiralling oil prices could spark stagflation - weak economic growth combined with high inflation.
Closer to home, surging expectations of local price growth and hawkish rhetoric from Reserve Bank of Australia deputy governor Andrew Hauser ratcheted up the likelihood of an interest rate increase next week, IG market analyst Tony Sycamore said.
"The combination of these events has resulted in the rates market aggressively repricing the RBA rate hike outlook," Mr Sycamore said.
"The rates market is now pricing in 16 basis points, a roughly 64 per cent chance of a 25 basis point hike at next week's RBA board meeting."
Despite the gloomy outlook for geopolitics and local borrowing costs, banks and miners helped buoy the broader bourse, with financials gaining 1.1 per cent and raw materials up 1.8 per cent by lunchtime.
Investors bought up gold miners as the precious metal advanced to $US5,211 ($A7,308) an ounce, handing the All Ordinaries gold sub-industry a 1.7 per cent lift.
The mega miners all improved, with BHP up around $51.90 per share, Rio posting modest gains and Fortescue up more than three per cent, as iron ore futures traded at five-week highs around $US103 a tonne.
Rare-earth miners charged higher, led by Lynas, which rocketed 14.3 per cent after locking in a price floor with a Japanese trading partner. Mineral sands specialist Iluka Resources jumped more than eight per cent.
The big four banks and the bigger insurers helped support the heavyweight financials sector, which is still recovering from significant selling pressure the previous week as investors tried to price the risk of the ongoing conflict.
GQG Partners underperformed the top-200, tumbling 6.6 per cent after net outflows took a chunk out of the group's solid investment performance in February.
Energy stocks slipped 0.3 per cent by lunchtime, a relatively settled move for the sector that has recently whipsawed at the mercy of volatile oil and gas prices.
Woodside and Santos edged lower along with coal producers, while most uranium stocks improved for a second session after dipping late last week.
Brent crude faded to $US86 a barrel after the Trump administration flagged it was open to easing sanctions against Russia to shore up supply.Â
Oil prices are still roughly 21 per cent higher than before the conflict began but have eased significantly from Monday's peak above $US115 a barrel.
Health care and IT stocks reversed after a strong session on Tuesday, with each segment down more than 1.2 per cent in broad-based moves.
The Australian dollar was buying 71.31 US cents, after spiking to a more than three-year high of 71.68 US cents overnight, and up from 70.77 US cents on Tuesday at 5pm, as bets narrowed on a potential interest rate hike next week.
Some market watchers, like MFS Investment Management, still think the Reserve Bank could leave rates unchanged at its meeting on March 17.
But others are wondering about the feedback to the central bank from its regular business liaison, fixed income research analyst Carl Ang noted.
"While recent official commentary has been largely balanced on risks stemming from the Iran conflict, there is the possibility of liaison feedback intensifying RBA concerns of cost pressures and price mark-ups that entrench underlying inflation well above target," Mr Ang said.
