US-Iran Tensions Spark Oil Price Surge, Risk Appetite Fades

Escalating US-Iran tensions pushed oil prices higher on Wednesday, denting risk appetite across European equities. The FTSE 100 slipped 0.30% as of 03:18 ET (07:18 GMT), with Germany's DAX falling 0.22% and France's CAC lost 0.16%. Sterling dropped 0.12% against the dollar to $1.3501.

Iran claimed it struck US bases in the UAE, Iraq, and Jordan, while the US said its CENTCOM forces targeted IRGC air defense sites and radar systems. The conflict added a fresh geopolitical risk premium to oil prices, with Brent crude rising 0.37% to $95 a barrel.

Analysts at Jefferies downplayed the impact of potential Fed rate hikes, citing likely benign CPI data in September. However, they noted that the bar for a hike has fallen following comments from Fed governor Kevin Warsh on credibility.