Updates prices, adds details, and analyst comments

By Utkarsh Hathi

June 12 (Reuters) - European shares were on track to log their best day in a month on Friday, with all major indexes gaining more than 1%, as renewed hopes of peace in the Middle East sent oil prices lower and lifted sentiment.

Brent crude fell more than 4%, extending the previous session's losses, after U.S. President Donald Trump cancelled plans to strike Iran and said a deal could be reached as soon as this weekend. O/R

The pan-European STOXX 600 index .STOXX advanced 1.7% to 632 points by 0850 GMT. Spain's IBEX 35 Index .IBEX outperformed regional peers, climbing more than 2.5%.

"European markets are enjoying the decline in oil prices. Unless the oil prices spike again, we could see this enthusiasm going on," said Ipek Ozkardeskaya, senior market analyst, Swissquote Bank.

The week saw sharp swings on AI-linked stocks, pressure on UK-listed banks amid tightening rules in China, lingering uncertainty in the Middle East, and the European Central Bank’s quarter-point rate hike. Despite these swings, the benchmark was on track to end the week higher.

Traders still expect borrowing costs to rise another 25 basis points before the end of the year, according to LSEG-compiled data.

Bundesbank President Joachim Nagel said on Friday that the ECB will keep all options open for its July meeting and will be ready to act again if necessary.

Among sectors on Friday, energy .SXEP was the only laggard, tracking crude prices.

Travel and leisure stocks .SXTP led sectoral gains and hit a five-month high with a rise of 4.9%. Lufthansa LHAG.DE and Air France AIRF.PA added 4.6% and 5.7%, respectively, and Wizz Air WIZZ.L jumped 7.1%.

The STOXX 600 banks index .SX7P gained 3.8%, with Barclays BARC.L and Standard Chartered STAN.L climbing more than 3% each.

Commerzbank CBKG.DE added 3.8%, UBS UBSG.S rose 2.3%, and Deutsche Bank DBKGn.DE jumped 5.4%.

AI-exposed industrial Schneider Electric SCHN.PA rose 1.6%.

Novo Nordisk NOVOb.CO added 0.3% after Britain's medicine regulator approved the drugmaker's weight-loss pill on Thursday, making the UK the first market in Europe where patients can access the oral treatment.

Among other movers, online gaming operator Entain ENT.L rose 2.7% after Barclays upgraded the European gaming sector to "market-weight".

On the data front, German inflation eased slightly to 2.7% in May, while Britain's economy contracted by 0.1% in April.

Investors will also be focusing on SpaceX's SPCX.O market debut on the Nasdaq later in the day, and its potential fallout on growth stocks in the U.S.