* STOXX index up 1.9%

* Travel and leisure shares climb

* Spain stocks hit record high

By Utkarsh Hathi and Ragini Mathur

June 12 (Reuters) - European shares surged on Friday, with

major indexes jumping more than 1%, as renewed hopes for a

diplomatic breakthrough in the Middle East dragged oil prices

lower and injected fresh optimism into the market.

Brent crude futures fell 3.7%, extending the previous

session's losses, after U.S. President Donald Trump cancelled

plans to strike Iran and said a deal could be reached as soon as

this weekend.

The pan-European STOXX 600 index advanced 1.9% to

633.21 points, logging 1.7% gains for the week.

Spain's IBEX 35 Index outperformed regional peers,

climbing more than 2.6% and hitting an all-time high.

"After a week or two in which you actually have seen a bit

of two-way price action, mostly on the downside... it has given

sentiment across Europe the shot in the arm it was looking for,"

said Chris Beauchamp, chief market analyst at IG Group.

"European stocks are still cheaper than their US

counterparts, particularly in tech... perhaps it's time

investors can look again at the stocks in Europe with more

confidence because of the lower valuations."

The upbeat end to the week followed a period of heavy turbulence

for European shares, with sharp swings in AI-linked tech stocks,

pressure on UK-listed banks due to tightening rules in China and

a quarter-point rate hike by the European Central Bank.

Traders still expect borrowing costs to rise another 25

basis points before the end of the year, according to data from

LSEG.

Energy shares were the only laggards on Friday, tracking

falling crude prices to decline 1%.

Travel and leisure stocks were the day's top performers,

rising 4.1% and hitting a five-month high. Airlines Lufthansa

and Air France added 5.2% and 8.4%,

respectively, while integrated tourism group TUI AG

jumped 8.7%.

The STOXX 600 banks index led sectoral gains with a

4.3% rise, with Deutsche Bank and Societe Generale

climbing more than 6% each.

Acciona Energia jumped 13% after media reports said

global infrastructure funds were teaming up to bid for stakes in

the Spanish renewable energy firm. Its parent, construction and

energy conglomerate Acciona, also rose 10.4%.

Novo Nordisk added 1.7% after Britain's medicine

regulator approved the drugmaker's weight-loss pill on Thursday,

making the UK the first market in Europe where patients can

access the oral treatment.

On the data front, German inflation eased slightly to 2.7% in

May, while Britain's economy contracted by 0.1% in April.

Global investors kept a close eye on the U.S. market, where

SpaceX's stock jumped over 20% in its Nasdaq debut on

Friday, lifting its valuation to more than $2 trillion.