European shares firm as worries of US involvement in Mideast conflict ease

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Updates with early European prices

By Sanchayaita Roy and Purvi Agarwal

June 20 (Reuters) - European shares rose on Friday after declining for three straight sessions, as a stall in the United States' involvement in the Middle East conflict helped soothe investor concerns.

The pan-European STOXX 600 .STOXX was up 0.6% at 538.85 points at 0834 GMT. The benchmark is set to log a second consecutive weekly fall.

Israel and Iran's air war entered a second week and European officials sought to draw Tehran back to the negotiating table.

The White House said President Donald Trump will decide within the next two weeks about whether to join Israel in the war. That helped improve market sentiment, spurring some interest in risk assets that were sold off earlier in the week on uncertainty around how long the conflict would go on.

"The investors are taking a little bit more risk on their shoulders... it is perhaps because the U.S. is now giving itself two weeks and maybe some diplomatic opening window there to resolve the situation in Iran," said Ipek Ozkardeskaya, senior market analyst at Swissquote Bank.

Banks .SX7P rose 1.3%, leading broader gains.

Travel and leisure stocks .SXTP were also up 1.3%, led by a 4.8% gain in Europe's largest travel operator TUI TUI1n.DE after Barclays upgraded the stock to "overweight" from "underweight".

Conversely, energy shares .SXEP were at the bottom of the index with a 0.3% decline but were headed for a weekly gain. O/R

Investors also remain wary of the approaching July 8 tariff-pause deadline, with little progress on trade deals with Washington. European Commission President Ursula von der Leyen is still aiming to reach a deal by July 9.

"Geopolitical tensions are kind of hiding the other worries in the market, which are trade negotiations being delayed with the U.S. occupied with what to do with the Middle East," said Ozkardeskaya.

Trump's tariffs have been a source of turmoil and volatility in the last few months, and have already begun to upend global supply chains and threatened economic growth.

Most regional bourses were also higher, with ones in Germany .GDAXI and the UK .FTSE up 0.8% and 0.4% respectively.

Among other stocks, London's Berkeley BKGH.L was the biggest percentage decliner, down 6.7%. The homebuilder named current finance chief Richard Stearn as its new CEO, but reported an annual pre-tax profit slightly ahead of market expectations.

Eutelsat ETL.PA shares jumped over 19% after the French government announced it would become the satellite company's biggest shareholder following a 1.35 billion-euro ($1.55 billion) capital increase.

Markets in Sweden and Finland were closed for a public holiday.

(Reporting by Sanchayaita Roy and Purvi Agarwal in Bengaluru; Editing by Eileen Soreng and Janane Venkatraman)

((Sanchayaita.Roy@thomsonreuters.com;))