UPDATE 1-Oil boost and Italy budget hopes support European shares; Next shines


* STOXX 600 up 0.2 percent

* Oil stocks hit highest since mid-July

* Italian stocks helped by budget compromise talk

* Next shines after raising full-year guidance (For a live blog on European stocks, type LIVE/ in an Eikon news window)

MILAN, Sept 25 (Reuters) - European shares were supported in morning trading on Tuesday by gains among oil stocks, while British clothing retailer Next rallied after raising its profit guidance.

The pan-European STOXX 600 index rose 0.2 percent by 0801 GMT, recovering part of the losses suffered in the previous session when worries over a protracted U.S.-Sino trade war sparked profit-taking.

Optimism over the Italian budget also buoyed sentiment.

Oil majors BP and Shell rose more than 1 percent after Brent hit a fresh four-year high amid looming U.S. sanctions against Iran and an apparent reluctance by OPEC and Russia to raise output to offset the expected to hit to supply.

"Russia and Saudi Arabia essentially ignoring Trump's pleas, combined with U.S. sanctions hitting Iran's oil exports in early November means we expect fresh multi year highs for oil, which will also help the oil majors such as BP and Shell to gain ground in the near term," LCG analyst Jasper Lawler said.

The oil and gas index led sectoral gainers, up 1 percent at its highest level since mid-July.

Commodities trader and miner Glencore added 2.2 percent after launching a $1 billion share buyback.

Heavyweight drugmaker Novartis rose 1.2 percent after saying it would cut about 2,200 jobs in Switzerland over the next four years to help boost profitability.

Top gainer on the STOXX was Next, up 8.3 percent.

The clothing retailer posted a 0.5 percent rise in first-half profit and raised its full-year guidance after better-than-expected trading in August and early September.

Signs that Italy's coalition was likely to reach a compromise over the 2019 budget lifted Italian stocks and bonds with the country's top FTSE MIB equity index up around 1 percent, outperforming the broader market.

State-controlled Italian defense contractor Leonardo rose more than 3 percent after it won a helicopter order from the U.S. Air Force.

Italian banks, which are sensitive to political risk due to their big sovereign bond holdings, rose 1.5 percent. Their gains helped and growing expectations of a rate hike in the euro zone next year helped lifted the European banks up 0.7 percent.

Elsewhere, British American Tobacco fell 1.9 percent after news the cigarettes maker named Jack Bowles as CEO, while rival Imperial Brands added 0.6 percent following a trading update. (Reporting by Danilo Masoni; Editing by Alison Williams)