Australian shares ended higher on Friday as energy stocks advanced on higher oil prices following a US airstrike in Iraq, with signs of growth in China adding to the gains.

Stocks, however, pulled back from session highs as the airstrike that killed a key Iranian personnel heightened geopolitical tensions.

Resources stocks recorded big gains, with energy shares rallying 1.7% to their highest in more than two weeks, as oil prices soared on concerns of a supply disruption following the airstrike.

The S&P/ASX 200 index closed 0.6% firmer at 6,733.5, after ending 0.1% higher on Thursday. The benchmark fell 1.3% this week to mark its first weekly loss in three.

Oil and gas major Woodside Petroleum Ltd ended 0.9% higher, while Oil Search Ltd jumped 3.2%.

Sentiment got a further boost after a private survey on Thursday revealed that Chinese production activity in December continued to grow and business confidence had strengthened, hinting at a recovery in the economy in the wake of a Phase 1 trade deal with the United States.

The Chinese central bank's decision to lower the amount of cash that all banks must hold as reserves in a bid to free up billons of dollars also lifted the mood.

Aussie miners advanced 0.7% on firm iron ore prices. The sub-index declined 0.5% this week after three consecutive weekly gains.

Anglo-Australian miner BHP Group advanced 0.5% to post its best session in a week, while peer Rio Tinto rose 0.2%.

A rally of 1.9% in the gold index also boosted the benchmark.

Heavyweight financial sub-index also added to gains as they rose 0.7%. All components of the 'Big Four' banks closed in the black.

Meanwhile, New Zealand's benchmark S&P/NZX 50 index ended up 0.9% at 11,555.97 after markets resumed trade following two days of holidays.

Auckland International Airport Ltd and Ryman Healthcare Ltd underpinned the gains in the index.

The benchmark lost 0.1% for the week.