By Pranav Kashyap and Avinash P
March 18 (Reuters) - European shares climbed on Wednesday, extending their rebound, as easing crude prices lifted investor sentiment, with markets now turning their attention to the U.S. Federal Reserve's upcoming interest-rate decision.
The pan-European STOXX 600 rose 0.5% to 605.69 points by 1015 GMT, marking its third straight session of gains - its longest winning streak in a month.
Global markets found some breathing room as oil prices fell after their recent surge,
even as tensions in the Middle East deepened following the killing of Tehran's security chief and escalating hostilities between Israel and Iran. [O/R]
European equities have been under pressure lately, reflecting the region's heavy reliance on imported energy and its acute sensitivity to swings in crude prices. The benchmark has lost 4.4% over the past three weeks.
Though the conflict showed little sign of easing, the retreat in oil offered investors a measure of relief, underlining just how critical stable energy prices are for Europe. The bloc, a major importer of Middle Eastern oil, remains especially vulnerable to price spikes, as they can quickly feed into inflation and weigh on growth.
Financial stocks gave the benchmark its biggest lift on Wednesday, rising 2%.
Travel and leisure stocks, including airlines, advanced for a third straight session, up 1.1%, as lower fuel prices provided a tailwind. The airlines sector was among the hardest hit during the recent market turbulence, losing 5.4% over the past three weeks.
Defensive stocks like Nestle lost 2.1%, while Unilever fell 1.5%. Consumer staples stocks were the benchmark's biggest drag.
Markets are now bracing for the Fed's policy decision on Wednesday and the European Central Bank's on Thursday.
The ECB is widely expected to leave rates unchanged for now, but its commentary will be closely scrutinized for insight into how the recent oil shock could affect the region's inflation outlook and economic growth.
Rate-sensitive construction stocks edged 1.4% higher.
"Equities can navigate periods of slightly higher rate expectations, provided earnings deliver," said Lilian Chovin, head of asset allocation at Coutts.
"We're not in panic territory," Chovin said referring to the Iran war, "so there's probably less upside. But, European earnings haven't really delivered in Europe for quite some time and that's why markets are struggling to start a new uptrend."
Among individual movers, Diploma jumped 18% to a record high after it raised fiscal year 2026 guidance.
Bollore climbed 13.4% after the company proposed an exceptional dividend of 1.5 euros per share.
Airbus rose 2%. Aircraft leasing major AerCap agreed to buy 100 A320neo-family jets, the two companies said.
(Reporting by Avinash P in Bengaluru; Editing by Janane Venkatraman)
