US STOCKS-Wall Street advances on Mideast de-escalation hopes

By Purvi Agarwal and Twesha Dikshit

March 25 (Reuters) - Wall Street's main indexes rose on Wednesday as prospects of a de-escalation in the Middle East conflict allayed some investor fears around prolonged energy supply disruptions.

Pakistan has delivered a proposal from the United States to Iran, and either Pakistan or Turkey could be venues for discussions to de-escalate the war in the Gulf, a senior Iranian official told Reuters. Tehran has so far denied in public that it would negotiate with the Trump administration.

Global markets cheered earlier reports saying the U.S. was seeking a ceasefire, with investors hoping for a breakthrough that could help restore shipping through the crucial Strait of Hormuz. Oil prices sank almost 4%.

"Markets are seeing some sort of a pathway for de-escalation in the war. How soon could this materialize, the peace part of this situation? Are these really credible thoughts happening or is it just kind of the headline noise that we've been seeing back and forth?" said Aleks Spencer, chief investment officer at Bogart Wealth.

"Every day seems to be a different discussion."

At 09:37 a.m. ET, the Dow Jones Industrial Average .DJI rose 565.86 points, or 1.23%, to 46,689.92, the S&P 500 .SPX gained 76.13 points, or 1.16%, to 6,632.50 and the Nasdaq Composite .IXIC gained 319.76 points, or 1.47%, to 22,081.66.

The small-cap Russell 2000 index .RUT rose 1.5% to a two-week high.

U.S.-listed shares of Arm ARM.O jumped 15% after the company unveiled a new AI data center chip that is expected to bring billions of dollars in revenue.

Other chipmakers also edged higher with Intel INTC.O and Marvell Technology MRVL.O up almost 5% each, while Nvidia NVDA.O rose 2.5%. The Philadelphia SE Semiconductor index .SOX added 1.3%.

The S&P 500 consumer discretionary index .SPLRCD gained 2% with cruise operators Norwegian Cruise Line NCLH.N up 4.3%, while Carnival Corp CCL.N and Royal Caribbean RCL.N added more than 2.5% each.

Destiny Tech100 DXYZ.N surged 19% after a report that SpaceX aims to file its IPO prospectus as soon as this week. SpaceX is the fund's largest equity holding.

Other space companies also rose, with Rocket Lab RKLB.O, and Intuitive Machines LUNR.O adding 6.6% and 9.2%, respectively. EchoStar SATS.O shares added 8.1%.

The spike in oil prices tied to the Iran conflict has revived inflation concerns, complicating the interest rate outlook of central banks.

Markets are not pricing in any easing from the Federal Reserve this year, compared with two cuts anticipated before the war broke out, according to CME Group's FedWatch Tool.

BlackRock BLK.N CEO Larry Fink said oil prices could reach $150 a barrel and cause a "global recession" if Iran "remains a threat" even after the war ends.

Among other movers, U.S.-listed shares of JD.com JD.O and Alibaba BABA.N gained more than 3% each after Chinese state media and the regulator urged the food delivery platform industry to end a bleeding price war.

Robinhood Markets HOOD.O added 6.6% after the trading platform announced a new $1.5 billion share buyback program.

Advancing issues outnumbered decliners by a 6.5-to-1 ratio on the NYSE and by a 5.17-to-1 ratio on the Nasdaq.

The S&P 500 posted 8 new 52-week highs and one new low while the Nasdaq Composite recorded 29 new highs and 39 new lows.