The S&P/ASX200 rose 8.5 points by midday, up 0.1 per cent, to 8,542.8, as the broader All Ordinaries edged 1.8 points higher, up 0.02 per cent, to 8,747.1.
Iran has reportedly rejected a 15-point peace plan proffered by the US, instead issuing its own demands for de-escalation, including reparations for damages and recognition of its sovereignty over the Strait of Hormuz.
"Stripping out the narrative and possibly propaganda, there is still a fresh build up of US assets and personnel in the region, suggesting that the Trump administration may be getting his ducks in a row to at least give himself the option of a limited ground invasion, designed to take back control of the Strait of Hormuz," Capital.com senior market analyst Kyle Rodda said.
"Alternatively, this could be similar to the end of February, where constructive language about ongoing talks is something of a Trojan Horse to buy time before launching new hostilities."
Energy stocks were again ahead of the other 11 local sectors, as oil edged higher as the US and Iranian governments accused the other of seeking an off ramp to conflict.
Woodside shares jumped 1.8 per cent to $34.21 after it took control of the Beaumont New Ammonia facility in Texas, which has the capacity to produce and export up to 1.1 million tonnes of ammonia each year.
Raw materials eased 0.2 per cent after a strong rebound from recent weakness on Wednesday, with gold miners mostly in the red as the precious metal's prices steadied near $US4,528 ($A6,522) an ounce.
Mega miners BHP and Rio Tinto continued to make tentative gains, up 0.1 per cent and 0.4 per cent respectively, while Fortescue slipped behind and iron ore futures held steady near $US106 a tonne.
The heavily weighted financials sector crept higher as CommBank led three of the big four banks higher with a 1.4 per cent boost to $174.57.
NAB continued to underperform and is down more than six per cent this week to $42.63, following warnings and a downgrade from investment group Morgan Stanley.
Bourse operator ASX has appointed former Cboe boss Vic Jokovic as a non-executive director.
Cboe won approval in 2025 to list new companies, providing an alternative to ASX, which has been plagued by outages and governance concerns in recent years.
Washington H Soul Pattinson shares rose 0.7 per cent after the investment group expanded its first half profit by 6.7 per cent to $304 million, as its net asset value swelled to $13.8 billion from $12.1 billion a year earlier.
Airlines were mixed, with Qantas dipping almost two per cent and Virgin swinging a similar magnitude in the other direction, as Virgin continued its bounce from a nearly 30 per cent sell-down since the Persian Gulf conflict began.
IT and real estate stocks made up the two worst-performing sectors, down more than one per cent each, with both under pressure recently from heightened expectations of interest rate rises.
Droneshield was the top-200's best performer, up more than 30 per cent in two days, buoyed by investor confidence in defence stocks.
Mobile marketplace and gig economy app operator Airtasker has struck a strategic deal with Nine Entertainment, with Nine chipping in $5 million to boost the company's brand awareness.
The Australian dollar was buying 69.42 US cents, down from 69.71 US cents on Wednesday at 5pm.
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