Dec 27 (Reuters) - Australian shares rose on Wednesday to their highest level in 20 months as trade resumed after a long holiday weekend, with Wall Street's strong gains overnight underpinning the market.

The S&P/ASX 200 index advanced 0.6% to 7,548.3 by 0042 GMT, hitting its highest level since April 21, 2022. Markets were closed on Monday and Tuesday on account of Christmas and Boxing Day.

U.S. stocks extended their rally on Tuesday, kicking off the final week of 2023 with expectations that the Federal Reserve will begin cutting interest rates as soon as March.

In Sydney, commodity stocks led the gains in broad-based buying. Miners rose more than 1.3% on the back of gains in iron ore prices. BHP Group, Rio Tinto and Fortescue were up between 0.1% and 1.5%.

Energy stocks climbed 0.7% after oil prices rallied overnight as further attacks on ships in the Red Sea prompted fears of shipping disruptions. Woodside Energy and Santos both climbed 0.8% and 0.9%, respectively.

Rate-sensitive financials rose 0.2%, with the "Big Four" banks gaining between 0.3% and 0.7%.

Technology stocks tracked their Nasdaq peers higher, gaining 0.7%. Block's Australian shares and accounting software firm Xero advanced 1.7% and 0.9%, respectively.

In corporate news, CAR Group said its unit had withdrawn its application for an initial public offering eligibility review with the Korea Stock Exchange. Shares of the online auto classifieds firm rose 0.4%.

In New Zealand, the benchmark S&P/NZX 50 index dropped 0.2% to 11,610.65. (Reporting by Roshan Thomas in Bengaluru; Editing by Subhranshu Sahu)