REFILE-CANADA STOCKS-TSX rises on prospects of Mideast truce

By Rashika Singh

March 25 (Reuters) - Canada's main stock index advanced on Wednesday as signs of potential de-escalation in the Middle East conflict helped allay investor concerns about extended disruptions to energy supplies.

At 10:49 a.m. ET, the Toronto Stock Exchange's S&P/TSX composite index .GSPTSE was up 1.3% at 32,358.13.

Pakistan has delivered a U.S. proposal to defuse tensions and help end the war in the Gulf, with either Islamabad or Turkey playing potential hosts if the talks went ahead, an Iranian official told Reuters on Wednesday. However, Tehran has publicly denied it will negotiate with the Trump administration.

"The markets are anticipating… that a full‑out de-escalation and ceasefire… will actually happen and then we can hopefully start to stabilize what this three-week struggle has been," said Shiraz Ahmed, founder at Sartorial Wealth. "If we're able to get a ceasefire and a meaningful one soon, then it may help limit sort of the long term damage."

Signs of diplomatic progress lifted sentiment, with nine of eleven sectors on the TSX trading in green. The materials sector  .GSPTTMT led gains, up 2.5%, as gold prices firmed on a weaker dollar. GOL/

Oil prices, meanwhile, retreated on hopes that a potential ceasefire may help normalize flows through the Strait of Hormuz, a key gateway for about a fifth of the world's energy supplies. O/R. Energy shares .SPTTEN were down 0.3%, tracking crude.

A pullback in energy prices could ease pressure on central banks, even as geopolitical risks threaten to stoke inflationary fears. Traders expect the Bank of Canada to hold rates steady in April and have priced in two hikes by year-end, LSEG data showed.

The S&P/TSX information technology .SPTTTK index rose 1.5%, in line with gains in the tech-heavy Nasdaq on Wall Street.

Dollarama DOL.TO rose 1.7% after CIBC upgraded the retailer to "outperformer" from "neutral," lifting the consumer staples .GSPTTCS sector.