The benchmark S&P/ASX200 index closed 51.3 points, or 0.73 per cent higher, at 7049.1 points on Monday.
The All Ordinaries index rose 49.6 points, or 0.68 per cent, to 7323.2 points.
Russian President Vladimir Putin escalated tensions by ordering the country's nuclear forces be put on high alert on Sunday after Western nations imposed fresh sanctions on Russia over its invasion of Ukraine.
The harsh set of sanctions included blocking certain Russian banks' access to the SWIFT international payment system, prompting the rouble to plunge nearly 30 per cent to a record low.
"There are considerable concerns about the sanctions on Russia, as it applies to not only global trade flows but also carries the potential risk for a financial crisis in Russia that could ripple across the globe," IG market analyst Kyle Rodda said.
In the local market, strong gains in mining and energy stocks were offset by negative sentiment in the heavyweight financial sector.
Three of the Big Four banks closed in the red, with only National Australia Bank holding on to a 0.1 per cent gain.
The sector was also weighed down by news of heavy rain and flash floods in Queensland and northern NSW. Insurer Suncorp on Monday said it expected the heavy rainfall and floods in the region to cost it about $75 million, after it received more than 5,000 claims.
Suncorp shares ended 3.2 per cent lower at $10.77 and also dragged down rivals IAG and QBE by 3-4 per cent.
Healthcare shares were also under pressure, with Ramsay Healthcare and biotech giant CSL both slipping around 0.5 per cent.
The financial losses in particular pared hefty gains in mining and energy stocks as commodities prices soared over concerns of supply disruptions as the conflict in Europe escalates.
Mining was the best performing sector led by gold stocks as investors fled to safe haven assets. Newcrest, Regis Resources and North Star all rose more than 3 per cent.
Iron ore miners BHP and Rio Tinto also climbed by 4.4 per cent and 3.2 per cent each, while rare earths miner Lynas jumped 6.9 per cent to $10.23.
Energy stocks also gained after benchmark oil prices jumped back above $US100 a barrel, on heightened fears that oil shipments from the world's second-largest producer Russia could be disrupted.
Santos and Woodside ended 1.5 per cent and 2.1 per cent higher respectively.
In corporate news, buy-now-pay-later operator Zip Co agreed to buy US-focused Sezzle in a deal worth $491 million, as it looks to expand its reach in the key US retail market to take on rivals such as Afterpay.
Shares in both Zip and Sezzle remained in a trading halt on Monday.
Traders will be watching for commentary from the Reserve Bank of Australia's monthly board meeting on Tuesday, although no change in rates is expected.
Meanwhile, the Australian dollar took a knock as the escalating crisis in Ukraine clouded the outlook for global growth The local currency was buying 71.87 US cents at 1715 AEDT, compared to 71.97 US cents at Friday's close.
ON THE ASX
* The benchmark S&P/ASX200 index closed 51.3 points, or 0.73 per cent higher, at 7049.1 points on Monday.
* The All Ordinaries index rose 49.6 points, or 0.68 per cent, to 7323.2 points.
* At 1715 AEDT, the SPI200 futures index was up six points or 0.09 per cent to 7029 points.
CURRENCY SNAPSHOT
One Australian dollar buys:
* 71.87 US cents, from 71.97 cents on Friday
* 83.02 Japanese yen, from 82.95 yen
* 64.38 Euro cents, from 64.17 cents
* 53.78 British pence, from 53.62 pence
* 107.37 NZ cents, from 107.19 cents.
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