Europe's STOXX 600 gains over 1% on Middle East ceasefire hopes

By Avinash P, Johann M Cherian and ‌Niket Nishant

March 25 (Reuters) - European ​shares rose ​more than 1% on Wednesday on expectations of an imminent de-escalation in the Middle East conflict, though concerns about the war's economic impact kept traders on edge.

The pan-European STOXX 600 ‌was up 1.4% at 587.49 points, clinching its third straight day of gains after ⁠briefly dropping 10% from record highs earlier this week.

The major regional bourses also advanced more than 1%, with Britain's FTSE ‌100 leading the pack with a ‌1.4% gain. An index tracking volatility slipped 0.7 points to 31.1.

All the key sectors logged gains, with miners <.SXPP> and banks up 2.4% and 1.8%, respectively.

Travel and leisure stocks , which were hit earlier in ​March due to soaring energy prices, added 1.4%, with airlines, such as Lufthansa and Air France climbing 2.3% each.

Energy stocks gained 1.1%. Morgan Stanley disclosed it had turned bullish on the sector.

Oil ⁠prices slipped after President Donald Trump said the U.S. was making progress in its efforts to negotiate an end to the war with ​Iran. A source confirmed that Washington had sent Iran a 15-point settlement proposal.

However, caution lingered as Tehran denied that direct talks had taken place, with a spokesperson ​saying the U.S. is "negotiating with itself."

A senior Iranian official ‌told Reuters that Iran was still reviewing the U.S. proposal despite castigating the plan publicly.

"The market is right now running on optimism that is being injected by ⁠the U.S. alone," said Ipek Ozkardeskaya, senior analyst at Swissquote Bank. "If Iran doesn't cooperate in the coming days... we still could see oil prices spike back up."

There is little clarity on whether the talks would lead to the reopening ⁠of the Strait of Hormuz, which has been largely cut off since the Iran war erupted, with analysts saying ​that the long-term repercussions of elevated crude prices on the global economy could be drawn out.

Europe's dependence on oil imports has weighed on equities since the start of the war.

"The question is no longer whether Europe can grow in ‌a stable global environment. It is whether it can sustain that growth as geopolitical shocks begin to interact with its structural weaknesses," economists at the Institute ‌of International Finance wrote.

Among individual stocks, sustainable energy company Vestas Wind rose 6% after it received orders for undisclosed ⁠U.S. projects.

INWIT dropped 2.8% after Swisscom said ‌its Italian business Fastweb + Vodafone was ​terminating its master service agreement with the country's top telecom towers operator.

(Reporting by Avinash P, Johann M Cherian and Niket Nishant in Bengaluru; Editing by Eileen Soreng and ‌Sonia Cheema)

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