The S&P/ASX200 rose 41.3 points by midday on Thursday, up 0.46 per cent, to 8,942.2, as the broader All Ordinaries gained 46.1 points, or 0.51 per cent, to 9,163.2.
The modest bounce restores about $16 billion to the top 500 after Wednesday's $63 billion bloodbath as investors weighed surging oil prices and and their impact on global growth due to the Middle East conflict.
Risk sentiment initially eased overnight on rumours Iran was open to talks for a diplomatic solution, and as US treasury secretary Scott Bessent assured the public crude markets were well supplied, and flagged further announcements on the issue.
"Headlines yesterday that Iran had reached out via back channels to discuss a detente helped sentiment, although it was later quashed by the Iranians," Capital.com market analyst Kyle Rodda said.
"The situation remains chaotic, fluid and at risk of further escalation, with no clear off-ramp for either side in sight yet."
Energy stocks and raw materials stocks were the worst performers on the bourse, each down more than 0.7 per cent as the other nine local segments pushed higher.
Woodside and Santos sold off as crude prices eased, however the Brent benchmark was still trading at a more than 12 per cent premium to its price before the attacks.
Elsewhere in the sector, uranium stocks rebounded and coal producers were broadly higher.
Gold stocks sold off, despite the precious metal edging higher to $US5,172 an ounce - with local miner Northern Star now down more than nine per cent since Monday - because the gain in the underlying commodity was deemed insufficient to counterbalance higher projected energy costs.
Iron ore and copper giant BHP has continued to pull-back from the previous week's record-breaking run, down 1.5 per cent to $54.87, while Rio Tinto traded flat as iron ore futures rebounded back above $US100.80 a tonne.
Critical minerals producers also bounced back, with Lynas Rare Earths and Liontown up more than two per cent each and recovering from sharp drops on Tuesday.
Financials stocks helped to lift the bourse, with a 1.3 per cent rebound, as all big four banks and Macquarie made gains.
Major insurers were mixed, with sum-sector giant QBE dropping 3.8 per cent after going ex-dividend, while IAG and Suncorp recovered some of the previous day's losses, as limited commercial flights connecting Dubai to Australia and Europe resumed.
ASX-listed tech stocks outperformed the other sectors, up 3.9 per cent but ultimately still reeling from five months of heavy selling.
Real estate and healthcare stocks also came back, with a strong lead from biotech giant CSL, which gained 2.4 per cent after inking a contract to support Canada's influenza preparedness.
Consumer discretionary stocks were flat and remain at 10-month lows, as Australian household spending in December rose 0.3 per cent in January, rebounding from 0.5 per cent drop in December but lower than a projected 0.4 per cent.
Consumer staples rose 0.2 per cent, the defensive segment relatively steady since the weekend and performing better than most other sectors.
In company news, shares in casino owner operator Star Entertainment tumbled more than four per cent, after the Federal Court ruled against former CEO Matt Bekier, but cleared board directors over poor risk management allegations levelled by the corporate watchdog.
The Australian dollar was buying 70.83 US cents, up from 69.99 US cents on Wednesday.
25°C