The S&P/ASX200 rose 20.3 points by midday, up 0.21 per cent, to 9,252.3, as the broader All Ordinaries gained 18.8 points, or 0.2 per cent, to 9,442.9.
The move followed a weak session on Wall Street overnight, after crude prices jumped to their highest price since July as US-Iran relations further deteriorated.
"(US President Donald) Trump lashed out at Iran's demand for compensation, saying he would seek payment from Iran for all the people it has killed and wounded - a demand Iran almost certainly will never accept," Westpac economist Mantas Vanagas said.
"Trump's comments sent oil prices higher again, making investors more nervous about inflationary pressures ahead of Wednesday's key US CPI report."
Only four sectors were in the green by midday, led by a 3.7 per cent push in energy stocks as Woodside, Santos, coal producers and refinery operators rallied and Brent crude surged to nearly $US88 a barrel.
Miners and continued their recent rally, as gold hit two-month highs of $US4,430 ($A6,275) an ounce, lifting the metal's local sub-index 2.3 per cent.
Mega miners BHP and Rio Tinto continued their steady climb as copper and iron ore futures rebounded, bringing BHP to $64.29, less than $2 short of its record high.
Financials stocks fell 0.4 per cent, tracking with weakness in the big four banks and major insurers.
The health care sector is trading at its highest value since March, as investors leaned into big names like CSL, Pro Medicus and ResMed after a tough 10 months for the segment.
Consumer staples and real estate stocks trailed the other sectors, dipping 1.1 per cent each as Coles and Woolies faded and as ANZ tipped a deeper pullback in home prices.
In company news, NAB chief operating officer Les Matheson and technology boss Patrick Wright have announced their retirements, with their roles to be reallocated to other executives.
Stokes family-controlled SGH had more than a tenth of its value wiped after an earnings miss, despite lifting its full-year bottom-line net profit more than 30 per cent to $689.2 million.
California-headquartered tracking app provider Life360 tumbled more than 13 per cent after an earnings miss, despite growing second quarter revenue by almost 40 per cent to $US159 million ($A225 million).
With interest rate markets confidently expecting an interest rate hold from the Reserve Bank on Tuesday afternoon, all eyes and ears will be on governor Michele Bullock's post-decision statement for signs of the central bank's path ahead.
The Australian dollar is buying 70.58 US cents, Â down slightly from 70.66 US cents on Monday at 5pm AEST.
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