Donald Trump and the Pakistani prime minister, whose country has been mediating talks, announced the US and Iran had struck a peace agreement which also covers Lebanon, with an official signing ceremony to take place in Switzerland on June 19.
The agreement to reopen the Strait of Hormuz and resume oil trade was a positive step forward, Prime Minister Anthony Albanese and Foreign Minister Penny Wong said in a joint statement.
"We are pleased the agreement between the US and Iran includes steps towards reopening the Strait of Hormuz and the restoration of freedom of navigation," they said.
"While full recovery will take time, restoring this vital trade corridor is essential to easing pressure on energy prices and economises, including in our region."
While the peace was welcome, more work was needed to secure a "durable and lasting peace", the pair said.
"Iran must address longstanding concerns about its nuclear program and the threat it poses to international security," they said.
Assistant Treasurer Daniel Mulino said while details of the agreement were scant, it sounded positive.
"Clearly we've been wanting a deal to happen over the last few months, and we've been wanting to see a peaceful resolution and the reopening of the Straits of Hormuz," he told ABC Radio.
At various points in the conflict, the US and Iran have both announced the closure of the Strait of Hormuz, which in peacetime carries about 20 per cent of the world's oil.
The blockade has sent many countries, including Australia, scrambling to find additional petrol, diesel and jet fuel to avoid domestic shortages.
Mr Trump took to social media to announce the peace deal after four months of on-and-off fighting in the Middle East, triggered by US and Israeli strikes against Iran in late February.
"The deal with the Islamic Republic of Iran is now complete. Congratulations to all!" he said in a post on his platform Truth Social.
"I hereby fully authorise the toll free opening of the Strait of Hormuz, and, simultaneously herewith, authorise the immediate removal of the United States Naval blockade. Ships of the World, start your engines. Let the oil flow!"
