"The momentum from Europe was amplified today, mostly due to the fact that markets were so quiet during the recent holiday season," said Won Sang-pil, a market analyst at Tong Yang Securities.
"Investors will stay cautious in case Korean firms miss forecasts with their fourth quarter earnings reports, and stay focused for any further signs of trouble in the euro zone debt crisis, which remains the market's central theme," he added.
France's Nicolas Sarkozy will meet German Chancellor Angela Merkel on January 9, a prelude to the EU finance ministers' meeting and leaders' summit scheduled for later in the month which could be a critical juncture for bloc members to strike a compromise in enforcing new budget rules.
The Korea Composite Stock Price Index (KOSPI) rose 2.69 percent to close at 1,875.41 points.
Petrochemical firms and crude oil refiners spearheaded the rally after escalating tensions between Iran and the West threatened the critical oil supply route in the Gulf of Hormuz, driving the price of Brent crude to over $108 a barrel.
SK Innovation, the parent firm to South Korea's largest crude oil refiner SK Energy, saw its shares jump 6.41 percent, while S-Oil Corp, the country's third largest refiner, surged 4.48 percent.
Shares in LG Chem, South Korea's largest chemical company, rose 3.28 percent.
Shipbuilders and steelmakers, seen sensitive to shifting economic cycles, followed close behind with broad rallies.
Shares in Hyundai Heavy Industries, the world's largest shipbuilder, climbed 5.8 percent, while POSCO , the world's third largest steelmaker by market value, closed 3.06 percent higher.
Shares in Samsung Electronics Co, the largest issue on the KOSPI by market capital, gained 2.31 percent to close at a fresh record high of 1,105,000 won per share on robust pre-earnings forecasts and a solid outlook.
"Samsung Electronics is preferred among technology stocks due to its steady earnings outlook despite its challenging, current industry environment," said Kwak Tae-ho, a fund manager at Kyobo AXA Investment Management, adding that further upside for its shares was expected.
Kumho Tire Co lagged its peers to dip 0.97 percent on media reports that it was preparing a new rights offer worth an estimated 300 billion won, raising concerns among stakeholders that their share value may become watered down.
Foreign investors bought a net 315 billion won ($273.4 million) worth of shares while institutions were net purchasers for a third consecutive session, snapping up 231.6 billion won worth.
The KOSPI 200 was up 2.98 percent, while the junior KOSDAQ gained 1.39 percent.