Crude oil, US drive Europe shares to day's high

LONDON, July 7 (Reuters) - European shares rose to session highs in afternoon trade on Monday, led by a recovery in banking shares, a firm start to the day on Wall Street and a slide in the oil price.

By 1340 GMT the FTSEurofirst 300 index .FTEU3 of top European shares was up 1.1 percent at 1,176.17 points, at session highs.

Oil and gas shares were still the top peformers, followed by electricity and utility stocks. The latter rose after Spanish power producer Iberdrola (IBE.MC) rose 7 percent after weekend comments by Repsol YPF's (REP.MC) chairman over a potential merger between Iberdrola and Gas Natural (GAS.MC).

BP (BP.L) and Total (TOTF.PA) rose 1.7-2.5 percent.

Banks were among the top positive weights, having lagged for most of the session, as fresh worries about yet more credit-related writedowns dented the sector. HSBC (HSBA.L), Standard Chartered (STAN.L) and ING Groep (ING.AS) were all up between 2 and 3.5 percent.

U.S. benchmark indexes .DJI .SPX .IXIC rose 0.8 to 1.3 percent, boosted by the 3 percent drop in crude oil CLc1. (Reporting by Amanda Cooper)