Updates with analyst comment, prices

By Twesha Dikshit

May 6 (Reuters) - European shares advanced to a two-week high on Wednesday, with oil prices dropping and investor optimism rising after U.S. President Donald Trump cited "great progress" toward a comprehensive peace agreement with Iran.

The pan-European STOXX 600 .STOXX gained 1.5% to 618.89, as of 0826 GMT, rising for a second session after ending up 0.7% on Tuesday.

Major regional bourses also rose, with London's FTSE 100 .FTSE, Spain's IBEX 35 .IBEX, Germany's DAX .GDAXI and France's CAC 40 .FCHI, gaining between 1.4% and 1.7%.

Energy-dependent Europe has lagged major global markets that have hit record highs this year, driven by artificial intelligence-led optimism, amid lingering concerns about the impact of higher oil prices on growth and inflation.

"These increasing energy prices are waiting on European growth, and this is why the market is still concerned about the consequences of the energy shock on the European environment, and the capability of the corporates to absorb these shocks," said Mabrouk Chetouane, head of global market strategy at Natixis.

"Earnings are clearly growing much faster in the U.S. than in Europe. Only a 2.3% increase is expected for this quarter, which is quite low compared to the U.S."

The healthcare index .SXDP added 1.8% aided by Novo Nordisk's NOVOb.CO 7.5% gain after the Wegovy-maker raised its full-year outlook.

Demant DEMANT.CO surged 16% and was on track for its biggest one-day gain since October 2008 after the Danish hearing aids maker beat quarterly sales growth estimates.

Banks .SX7P and Industrials .SXNP were up 2.7% and 1.7%, respectively.

Defence shares .SXPARO added 2.4%. Italy's Leonardo LDOF.MI gained 2.8% after reporting higher first-quarter earnings, while Norway's Kongsberg KOG.OL jumped 6.3% after its order intake more than doubled for the quarter.

British banks Natwest NWG.L, Barclays BARC.L, Standard Chartered STAN.L, and Lloyds LLOY.L rose between 3.1% and 4.6%.

The automobile index .SXAP rose 3.1%. BMW BMWG.DE surged 5.6% after the German carmaker maintained its full-year outlook despite posting a steep drop in its first-quarter pretax profit.

PMI data showed that Eurozone services activity contracted for the first time in almost a year in April, hit by weakening demand amid the Middle East war, which weighed on consumer-facing sectors.

Among other movers, Diageo DGE.L was up 4.8% after the world's top spirits maker posted a surprise growth in quarterly organic sales.

Equinor EQNR.OL fell 5.4% after the Norwegian energy group reported a bigger-than-expected rise in first-quarter profit and is already up 62% year-to-date due to higher energy prices.