The benchmark S&P/ASX200 was up 89.5 points, or 1.86 per cent, to 4,903.8, while the broader All Ordinaries added 85.6 points, or 1.76 per cent to 4,957.1.
At 4:15pm (AEST), the September share price index futures contract was up 72 points to 4,907 on volume of 32,212 contracts.
IG Markets deputy head of dealing for Australia Martin Batur said heavyweight mining stocks provided most of the upwards momentum, while energy plays added to the gains on the back of a weaker Australian dollar.
Stronger base metal prices helped send BHP Billiton up by $1.53, or 4.44 per cent, to $36.00, while its takeover target and rival Rio Tinto surged $4.70, or 4.63 per cent, to $106.25.
As oil prices hovered around $US100 per barrel, Woodside found 53 cents to $52.61, Oil Search shed six cents, or 1.06 per cent, to $5.62 and Santos surged $1.17, or 6.43 per cent, to $19.37.
"Financials picked themselves up off the canvas as concerns over a Lehman Brothers knockout eased slightly," Mr Batur said.
He said ANZ was a strong performer, while on the downside local investment bank Babcock & Brown extended its poor run.
ANZ added 40 cents, or 2.37 per cent, to $17.25, Commonwealth Bank rose 99 cents, or 2.36 per cent, to $42.99, Westpac advanced 26 cents to $23.52 and National Australia Bank rose eight cents to $23.96.
Babcock & Brown shed 10 cents, or five per cent, to $1.90 after hitting a low of $1.76 in intraday trade.
Takeover target and mining contractor Ausdrill blamed a fall in the company's share price on hedge fund selling, after comments from suitor Macmahon Holdings that its bid was unlikely to succeed.
Shares in Ausdrill were up 15 cents to $2.15, while Macmahon's shares gained 3.5 cents to $1.835.
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