The S&P/ASX200 gained 233 points on Wednesday, up 2.55 per cent, to 8,951.8, as the broader All Ordinaries lifted by 244.5 points, or 2.74 per cent, to 9,165.7.
Oil prices plummeted on news of the temporary truce, which hinges on key agreements including the re-opening of the Strait of Hormuz to western oil tankers, after its effective blockade by Iran plunged the world into an energy crisis.
It was the bourse's best day in about a year, returning $83 billion to the All Ordinaries' $3.1 trillion combined market value after it fell more than 10 per cent from February's record high to its lowest point during the conflict.
"A great day for Australian investors with real strength across the board and the only stocks under pressure are those that have been performing well during this very tough period for markets," Moomoo market strategist Michael McCarthy told AAP.
But fairly low trading volumes suggested a lack of conviction in the rally.
"Big moves up like this are just as concerning as big drops, because they suggest that volatility remains elevated and until we see more calm trading conditions, investors should remain on alert," Mr McCarthy said.
Eight of 11 local sectors charged higher, led by miners and interest rate-sensitive segments, while energy, utilities and consumer staples dipped after appreciating during more than five weeks of conflict.
Gold miners were among the best performers, as the precious metal firmed to $US4,833 ($A6,837) an ounce, helping lift the All Ordinaries gold sub industry almost nine per cent.
Iron ore giants BHP and Rio Tinto were also strong, each advancing more than three per cent, while investors bought up "shiny new" sub-sectors such as battery minerals and rare earths producers.
Unsurprisingly, energy stocks missed their invite to the party, the segment tumbling a whopping 7.2 per cent, as the West Texas crude oil  benchmark crumbled from above $US118 a barrel to as low as $US92.
Woodside was hit particularly hard, shedding more than a 10th of its value to trade at $32.06 a share, but still up a healthy 13.4 per cent since the US and Israel began shelling Iran on February 28.
IT stocks surged 7.3 per cent higher, real estate trusts jumped almost four per cent and consumer discretionary players improved by 3.5 per cent.
Local banks improved, with NAB leading its big four counterparts higher with a 3.9 per cent push to $142.18, after underperforming the other three in recent weeks on the back of some cautious updates from investment giant Morgan Stanley.
Despite the improved outlook, the impact of the conflict was expected to linger, Capital.com senior market analyst Kyle Rodda said.
"Growth at the margins will still be weaker and inflation is certainly going to be higher because of the crisis, and that's going to have an impact on corporate earnings as well as inflation," he told AAP.
Also there were unexpected pressure points throughout supply chains that had not yet been exposed, or discounted into some asset price, Mr Rodda said.
The Australian dollar is buying 70.70 US cents, up from 69.19 US cents on the improved risk sentiment and a rosier outlook for global growth and commodity prices.
ON THE ASX:
* The S&P/ASX200 gained 223 points, or 2.55 per cent, to 8,951.8.
* The broader All Ordinaries rose 244.5 points, or 2.74 per cent, to 9,165.7.
One Australian dollar trades for:
* 70.70 US cents, from 69.19 US cents at 5pm AEDT on Tuesday.
* 111.86 Japanese yen, from 110.56 Japanese yen.
* 60.45 euro cents, from 59.93 euro cents.
* 52.64 British pence, from 52.24 British pence.
* 121.04 NZ cents, from 121.26 NZ cents.
