Euro zone shares extended gains on Thursday to touch their strongest level in almost a year, as investors shrugged off hawkish messages from the European Central Bank and pinned their hopes on the global rate hike cycle ending soon.

A widely watched gauge of euro zone stocks jumped 1.4% to hit its highest level since Feb. 18, while the broader STOXX 600 index rose 0.9%.

The ECB raised interest rates for the fifth successive time on Thursday and signalled another half a percentage point increase for March but left its options open further ahead.

That followed commentary from the U.S. Federal Reserve and the Bank of England that was largely perceived as dovish.

"I am not sure the markets are fully buying into the longevity of this continued hawkish stance," said Stuart Cole, head macro economist at Equiti Capital.

"It's telling that German yields are lower, suggesting the market is anticipating we may well yet see a reversal in policy sooner rather than later as policy suddenly veers back to supporting growth."

The Fed on Wednesday acknowledged its progress in tackling decades-high inflation after delivering a 25 basis point rate hike, in line with expectations.

While the central bank projected more rate hikes this year, investors took a dovish cue from remarks by Fed Chair Jerome Powell, who made repeated references to "disinflation".

Germany's DAX index rose 1.6% as German ten-year yields fell after the ECB's decision.

London's blue-chip FTSE 100 rose 0.9% after the Bank of England earlier in the day raised interest rates for the tenth time in a row but dropped its pledge to keep increasing them "forcefully" if needed.

Rate-sensitive technology and real-estate were the top gainers on the STOXX 600, up 3.7% and 4.7% respectively.

Euro zone banks rose 0.7% to hit their highest in nearly one year.

Telecom Italia climbed 8.6% after receiving a non-binding bid for a controlling stake in its fixed-line network from U.S. investment firm KKR.

Microchips supplier Infineon gained 7.8% after bumping up its 2023 outlook, while French software maker Dassault Systemes rose 8.1% on strong 2023 revenue growth forecast.

Shell advanced 2.1% after a record $40-billion profit in 2022, while Spain's Santander gained 6.8% on reporting an annual growth of 1% in fourth-quarter net profit.