* Commerzbank shares rise after UniCredit's bid for

additional stake

* Middle East conflict impacts global oil supply, raises

inflation concerns

* Central banks expected to pause rate cuts amid economic

uncertainty

* European banks continue to face pressure amid market

volatility

By Avinash P

March 16 (Reuters) - Europe's STOXX 600 edged lower on

Monday, as the economic fallout from the Middle East war

weighed, while Commerzbank rose after UniCredit launched a bid

for an additional stake in the German lender.

Commerzbank shares advanced 1.4%, among the top

gainers, while Italian bank UniCredit slipped

2.2%.

UniCredit said it does not expect to take control of the

lender in which it already holds a 26% equity stake and an

additional 4% through total return swap contracts.

The pan-European benchmark STOXX 600 was down 0.3%

at 593.58 points, as of 0931 GMT, set for its fourth session of

decline.

The index has dropped more than 6% from a record high hit in

February, before the outbreak of U.S.-Israeli war on Iran.

With Iranian actions constraining traffic through the Strait

of Hormuz, a key conduit for around one-fifth of global oil and

liquefied natural gas, they pose a significant risk to the

global economy and roiling markets.

Central banks are in focus this week, with Europe among

those expected to pause further rate cuts at meetings held for

the first time since the war began.

"Given that the conflict is only two weeks old, policy will

be on hold, and therefore the focus will be on updated economic

forecasts from the Federal Reserve and from the European Central

Bank," said Jeremy Batstone-Carr, European strategist at Raymond

James.

Supply concerns have driven crude prices higher, and

sustained elevated prices could weigh on Europe's

import-dependent economy by adding to inflation pressures while

growth remains sluggish.

"More particularly, the market's focus will be on the

accompanying statement and the tenor of the press conferences

undertaken by (Fed Chair) Jerome Powell and (ECB) President

Lagarde and (Bank of England Governor) Andrew Bailey,"

Batstone-Carr said.

The banking sector extended its three-week slump with a

0.6% decline on Monday, weighing heavily on the European

benchmark.

On the flip side, the broader energy added 0.8% with

majors Shell and BP adding 1.4% each, as oil

prices remained above $100 a barrel.

Separately, Goldman Sachs ( GS ) raised its target for

Britain's FTSE 100 for the next 12 months to 10,800

points from 10,400 points.

Among other moves, Italian hearing aid group Amplifon

shares declined 10.3% after they announced plans to

buy Denmark's GN Store Nord's ( GGNDF ) hearing business for 2.3

billion euros ($2.6 billion).

Carlsberg added 1.4% after Berenberg upgraded

Danish brewer to "buy" from "hold".

Later in the day, European Union foreign ministers will meet to

discuss strengthening a small naval mission in the Middle

East, but are not expected to decide on extending its role to

the choked-off Strait of Hormuz, diplomats and officials say.