The S&P/ASX200 gained 126.5 points on Tuesday, up 1.4 per cent, to 9,145.8, as the broader All Ordinaries rose 133.5 points, or 1.45 per cent, to 9,311.9.
The top 200 ended the session roughly 57 points short of its March record high, which preceded a more than 10 per cent correction after the US-Iran conflict plunged global energy markets into chaos and hammered growth hopes.
"The local bourse was supported by a solid night on Wall Street, helped by cleaner positioning after the sharp sell-off in tech stocks that peaked last week, alongside softer Middle East headlines after President Trump paused planned strikes on Iran," IG market analyst Tony Sycamore said.
Ten of 11 local sectors rallied, with strong performances from banks, miners and technology stocks despite oil prices inching higher as Iranian officials denied US claims the nations were in peace talks.
NAB led the big four banks higher with a three per cent lift to $42.85, while CommBank advanced 1.6 per cent to $180.72 as it flagged higher-than-expected loan arrears in its upcoming financial report due to a bookkeeping change.
Mining stocks also provided strong support, helped by better-than-expected US manufacturing data, which noted its biggest expansion in factory activity in more than four years.
BHP missed out on the momentum, dipping 0.3 per cent to $60.52 after failing to reach an agreement with unions at the Fair Work Commission to halt a strike this weekend, potentially stalling $260 million in iron ore exports.
Gold stocks performed well, with Evolution and Northern Star up more than two per cent each despite the precious metal languishing in its recent range to trade at $US4,060 ($A5,784) an ounce.
Local technology stocks outperformed the broader market, the sector up nearly four per cent in a broad based rally that tracked a strong night for the Nasdaq.
Health care stocks also soared, gaining 2.4 per cent with particularly strong performances from CSL and Pro Medicus.
Consumer-facing sectors inched higher after household spending rose 0.8 per cent in July, easing from 1.2 per cent in May but beating forecasts.
"Annual growth lifted to six per cent, taking some of the doom and gloom out of subdued consumer confidence and the cooling housing market," IG's Mr Sycamore said.
"While today's print won't move the dial ahead of next week's Reserve Bank board meeting ... it does reinforce the risk of a fourth rate hike this year."
In company news, Qantas has played down reports the airline was considering offshoring 1000 jobs as part of a deal with Accenture, the Australian Financial Review reported.
The Australian dollar is buying 70.14 US cents, down from 70.27 US cents on Monday at 5pm AEST.
ON THE ASX:
* The S&P/ASX200 rose 126.5 points, or 1.4 per cent, to 9,145.8
* The broader All Ordinaries advanced 133.5 points, or 1.45 per cent, to 9,311.9
One Australian dollar trades for:
* 70.14 US cents, from 70.27 US cents at 5pm AEST on Monday
* 110.60 Japanese yen, from 110.16 Japanese yen
* 60.96 euro cents, from 60.96 euro cents
* 52.24 British pence, from 52.20 pence
* 119.58 NZ cents, from 119.56 NZ cents
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