The Australian sharemarket bounced back on Tuesday from a $90 billion sell-off the day before, after oil prices fell back below $US100 a barrel and US President Donald Trump suggested the Iran conflict could be winding down.

The S&P/ASX 200 Index rallied 1.1 per cent, or 93.60 points, to 8692.60, which restored $34 billion to the benchmark’s capitalisation after its biggest one-day drop in a year.

Gains were capped by lower US futures, oil’s intraday rebound, and the Bank of America forecasting the Reserve Bank of Australia would raise interest rates next week. The left the bourse well below its intraday peak of 8750.90.

Oil prices dropped by as much as 10 per cent before clawing back some losses to be off by 4.6 per cent to $US94.37 per barrel at the close. It surged almost 30 per cent on Monday to near $US120 per barrel in a wild session.

Market sentiment improved after Trump told CBS that the military operation was “very complete, pretty much” and “very far” ahead of its initial four- to five-week schedule.

VanEck deputy head of investments Jamie Hannah said markets were treating the spike in oil as temporary but cautioned that the disruption could last longer.

“The market sees Middle East tensions and thinks ‘short-term oil spike’. That may be too narrow a view this time around. Rather than a transitory shock, we may be entering a situation that lasts months,” he warned.

“The implications extend beyond headline risk and into the structural functioning of the energy ecosystem.”

Still, bargain hunters returned to the ASX with technology the strongest sector. US-based Life360 surged 10.3 per cent to $22.51. TechnologyOne rose 4.3 per cent to $27.44 and WiseTech Global 0.8 per cent to $51.08.

Materials were buoyed by a rebound in BHP, which clawed back 2.3 per cent of a 15 per cent pullback in the past week to close at $51.23. Elsewhere, Mineral Resources added 5.8 per cent to $57.45, lithium miner PLS 5.2 per cent to $4.67 and copper producer Sandfire 5.8 per cent to $16.60.

Investors also rotated into healthcare with CSL up 1.7 per cent to $144.56 as it announced plans to spend $2.1 billion to expand its plasma manufacturing operations in the United States. Pro Medicus gained 6.2 per cent to $139.69 and Neuren Pharmaceuticals 9.2 per cent to $12.75.

Telix Pharmaceuticals surged 7.8 per cent to $11 as it said early-stage results from its global phase 3 trial of TLX591 have been positive.

Energy stocks were sold in a bout of profit-taking. Woodside dropped 3.8 per cent to $30.18, Santos 3.5 per cent to $7.37 and Karoon Energy 6.8 per cent to $1.86.

Stocks in focus

In corporate news, mining chemicals and explosives group Orica retreated 3.4 per cent to $20.92 after flagging modest first-half earnings growth and a $100 million cost-reduction program.

Fortescue gained 1.2 per cent to $19.27 as it completed its acquisition of Alta Copper, taking full ownership of the Canariaco copper project in northern Peru.

And Air New Zealand suspended its full-year earnings guidance after the escalation of conflict in the Middle East sent jet fuel prices soaring. Shares in the loss-making New Zealand carrier were down 3.8 per cent to 38.5¢, extending Monday’s 8 per cent drop.