May 6 (Reuters) - The pan-European STOXX 600 index rose more than 2 percent on Wednesday in a broad rally, as reports of a possible deal between Washington and Tehran boosted risk appetite and sent oil prices tumbling, while positive corporate earnings and reports helped bolster optimism.

The Stoxx 600 index closed up 2.2 percent at 623.25 points, its highest level since April 17.

Major regional stock exchanges also rose. France's CAC 40 index led the gains, climbing 2.9 percent, while Milan's FTSE MIB index rose 2.4 percent, hovering near its highest level since 2000.

Iran said it was considering a new US proposal, following reports that the two sides were close to agreeing on a one-page memorandum to end the war in the Gulf.

Crude oil prices fell by about seven percent, and the energy sector was the only major sector in the Stoxx index to decline, dropping 2.5 percent. The decline in oil prices helped the travel sector, which is highly sensitive to these prices, to rise 5.8 percent, leading the gains among the index's sectors.

"Signs of progress toward an agreement are in some ways more positive for Europe than for the United States, simply because it is a region that is highly affected by the issue," said Kiran Ganesh, an analyst at UBS Global Wealth Management.

Lower crude oil prices may ease concerns about energy-driven inflation, a major drag on European stocks which remain below pre-war levels.

Data from the London Stock Exchange Group shows that financial markets expect the European Central Bank to raise interest rates at its June meeting by 67.6 percent, down from a probability of around 85 percent on Tuesday.

The banking sector rose 3.8 percent and the industrial sector 3.2 percent, and were the biggest supporters of the European index on Wednesday.

Shares of defense companies rose 4.7 percent. Shares of Italy's Leonardo climbed 5 percent after the company announced higher first-quarter profits, while Norway's Kongsberg also jumped 5 percent after its orders more than doubled in the first quarter.

Novo Nordisk's stock rose 2.5 percent after the maker of the Wigovy drug raised its full-year outlook and beat first-quarter profit estimates.

BMW shares jumped 5.4 percent after the German automaker maintained its full-year outlook despite reporting a sharp drop in quarterly pre-tax profit. The automotive sector index rose 4.2 percent.

As for economic data, services activity in the Eurozone contracted for the first time in almost a year in April, affected by weak demand amid the Middle East war.