The S&P/ASX 200 index ended the session 0.7% higher at 8,823.40 points, marking a broad-based advance across Australian equities.
Financials and technology sectors led the rally, benefiting from renewed investor confidence as geopolitical risks receded.
The move reflects a wider shift in global risk sentiment, with Wall Street equities also advancing on Monday following the announcement of a potential formal peace agreement between the United States and Iran.
The two governments confirmed late Sunday that they intend to preserve an interim peace deal, which had been threatened by recent military hostilities.
This development injected a wave of relief into risk assets, easing fears of prolonged supply disruptions and market volatility.
While crude oil prices maintained upward momentum earlier in the week, the prospect of a sustained truce has begun to temper extreme risk premiums.