(Updated at 10:22 a.m. ET/ 1422 GMT)

By Nikhil Sharma

Oct 3 (Reuters) - Canada's main stock index fell on

Thursday in a broader decline led by mining shares as escalating

tensions in the Middle East weighed on the broader market.

The Toronto Stock Exchange's S&P/TSX composite index

was down 84.04 points, or 0.35%, at 23,917.48.

At least 10 sectors nursed losses on the index, led by the

materials sector.

The materials sector lost nearly 1.5% as it

tracked gold prices that fell on fading expectations of a hefty

U.S. interest rate cut, while copper prices also retreated.

Canada's consumer discretionary and real estate

sectors were also among the top losers, falling 1.3%

and 1.1%, respectively.

The energy sector was the only outlier, up 1.8% as

oil prices rose on Thursday over concerns that the escalating

Middle East conflict could hit crude supply.

Markets watched the developments in the Middle East as the

conflict widens in the region, days after Iran launched

ballistic missile strike on Israel.

"The conflict in the Middle East is heating up, and that

seems to be adding to some jitters or conservatism from

investors," Josh Sheluk, portfolio manager at Verecan Capital

Management.

The escalation is countering the benefit Canadian markets

get from higher energy prices, added Seljuk.

Investor sentiment was also weighed by data that showed

business activity in Canada's services economy hit a six-month

low in September as firms shed jobs and new business dropped to

a near four-year low.

In the U.S., the weekly jobless claims data for last week

rose marginally, while services sector activity jumped to a

one-and-a-half-year high in September.

These data provide a picture on the labor market's

health and clues for policy adjustment in the respective

countries.

Odds for a 25-basis point cut at the U.S. Fed's November

policy meeting stand at 62.9%, up from 50.7% a week earlier, the

CME Group's Fed Watch Tool.