The benchmark S&P/ASX200 index finished Monday up 59.2 points, or 0.68 per cent, at 8,823.4, while the broader All Ordinaries gained 62.7 points, or 0.7 per cent, at 9,026.9.
In Washington, a Trump administration official said that "both sides will stand down for now and vessels can move freely" in the Strait of Hormuz after both sides traded tit-for-tat attacks at the weekend.
"Back and forth, back and forth, the war in the Middle East is like a tennis match that just won't end (a hybrid cricket/tennis match?)," Kiwibank economists Jarrod Kerr, Alexandra Turcu and Elliott Lowe wrote in a note.
But despite the fresh hostilities, markets were pricing in a peace deal as highly likely, and quite a few oil tankers had managed to get out of the strait during the small window of peace, the trio said.
Eight of the ASX's 11 sectors finished higher, with industrials, utilities and property closing lower.
The technology sector was the biggest gainer, climbing 4.0 per cent after sinking 5.2 per cent last week.
Wisetech Global rose 7.2 per cent, Xero added 4.5 per cent and Life360 climbed 11.6 per cent.
Other technology-focused companies also rose, with realestate.com.au owner REA Group gaining 3.8 per cent, Carsales.com owner CAR Group adding 4.2 per cent and buy now, pay later company Zip advancing 8.7 per cent.
Marc Jocum, senior product and investment strategist with Global X ETFs, said that tech investors appeared to be bargain-hunting some of the market's hardest-hit growth names, as Australian tech stocks were climbing out of drawdowns of more than 40 per cent in 2026.
Neuren Pharmaceuticals was the biggest gainer in the ASX200, surging 36.1 per cent to a five-month high of $16.60 after European Union regulators reversed a previous negative opinion to recommend approval of Neuren's flagship treatment for patients with Rett Syndrome, a rare neurodevelopmental disorder.
In the mining sector, Ramelius Resources gained 2.3 per cent to $3.07 after the goldminer agreed to sell its shuttered Edna May goldmine in Westonia, WA, to Forrestania Resources for $300 million in cash and shares.
Forrestania shares were in a trading halt as the company prepared for a capital raising to fund the acquisition.
Other goldminers finished mixed, with Northern Star dropping 2.3 per cent and Evolution rising 1.3 per cent as the precious metal changed hands at $US4,074 an ounce.
As for the iron ore giants, BHP rose 1.4 per cent to $59.82, Rio Tinto gained 0.3 per cent to $174.10 and Fortescue added 2.4 per cent to $19.52.
Energy Transition Minerals dropped 17.3 per cent to a year-and-a-half low of 4.3 cents after the Greenlandic government refused its request to extend an exploration license that covers its proposed rare earths project in the Danish territory.
In the financial sector, all of the big four retail banks finished in the green.
ANZ advanced 0.5 per cent to $35.20, Westpac rose 0.3 per cent to $35.24 and both NAB and CBA gained 1.0 per cent, to $37.89 and $163.61.
In the consumer discretionary sector, Accent Group finished flat at 71 cents after the shoe retailer urged shareholders to reject a 65-cent-per-share, zero-premium takeover offer from UK-based Frasers Group.
The Australian dollar was trading for 68.90 US cents, from 68.93 US cents at 5pm on Friday.
ON THE ASX:
 * The S&P/ASX200 on Monday rose 59.2 points, or 0.68 per cent, to 8,823.4
* The broader All Ordinaries gained 62.7 points, or 0.7 per cent, to 9,026.9
One Australian dollar trades for:
* 69.04 US cents, from 68.93 US cents at 5pm AEST on Friday
* 111.69 Japanese yen, from 111.39 Japanese yen
* 60.53 euro cents, from 60.58 euro cents
* 52.21 British pence, unchanged
* 122.05 NZ cents, from 122.09 NZ cents
