Australian shares rebound as traders focus on Iran diplomacy hopes

March 5 (Reuters) - Australian shares rose on Thursday after slipping more than 3% over the last two days, supported by financials and technology as investors raised their hopes of a de-escalation of Middle East tensions following news reports of Iran's diplomatic efforts.

The S&P/ASX 200 index .AXJO rose 0.5% to 8,947.8, as of 2309 GMT. The benchmark closed 1.9% lower on Wednesday.

Late Wednesday, the New York Times reported that operatives from Iran's Ministry of Intelligence have signalled openness to talks on ending the war to the U.S. Central Intelligence Agency $(CIA)$.

However, a source from the Iranian intelligence ministry later denied the details mentioned in the report, according to a local agency.

Meanwhile, the U.S.-Iran war has further widened after a U.S. submarine sank an Iranian warship off Sri Lanka, widening regional tensions and paralyzing shipping through the crucial Strait of Hormuz.

Back in Sydney, financials .AXFJ climbed 1.4%, marking their steepest intraday rise in two-weeks. The "Big Four" banks added between 1% and 2%.

Data on Wednesday showed the Australian economy grew at its fastest annual pace in nearly three years in the December quarter, raising concerns about inflation.

Markets are currently pricing in a nearly 80% chance of a hold at the central bank's next meeting on March 17 and a 85% chance of a rate hike in May. 0#AUDIRPR

Technology stocks .AXIJ gained 4.8% with WiseTech Global WTC.AX and Xero XRO.AX adding 4.4% and 5.2%, respectively.

The broader mining sub-index .AXMM slipped 1.2%, with BHP Group BHP.AX falling 1.4%.

Gold miners .AXGD dropped more than 2%, extending losses for a third consecutive session. Evolution Mining EVN.AX and Northern Star Resources NST.AX lost 1.7% and 2.6%.

Energy stocks .AXEJ fell 1%, defying oil prices holding steady near their highest level in over a year amid disrupted supply. O/R

In New Zealand, the benchmark S&P/NZX 50 index .NZ50 rose 0.6% to 13,617.88.

(Reporting by Anjali Singh in Bengaluru; Editing by Rashmi Aich)

((anjali.singh2@thomsonreuters.com;))