Iran has assessed possible strikes on U.S. military targets in southeastern Europe if President Donald Trump escalates the conflict, according to two regime insiders cited by the Financial Times. Potential locations include U.S.-linked assets in Bulgaria, where the Bezmer airbase has been approved for refueling U.S. aircraft, and Cyprus, where a British airbase was struck by a drone in March that Western officials attributed to an Iranian drone fired by proxy forces.
Tehran has also examined targeting subsea fibre-optic cables in the Strait of Hormuz if fighting intensifies. Negotiations to reopen the strategic waterway have stalled, with Trump stating there are 'no talks or conversations going on, or scheduled' with Tehran. A June U.S.-Iran agreement collapsed last month after attacks on vessels in the strait, followed by rounds of strikes and a renewed U.S. blockade of Iranian ports. Trump has warned Washington will destroy an Iranian bridge or power plant each time Iran targets a ship in the strait.
One regime insider said Iran would place 'no limits' on its response if the U.S. acts aggressively, saying: 'Should the US go too far, Iran will defend itself at any price, go beyond the region and hit Europe too.' The Islamic Revolutionary Guard Corps has already warned that any base used to attack Iranian territory would be considered a legitimate target. Iran demonstrated long-range strike ambitions earlier this year by firing missiles at Diego Garcia, a joint U.S.-UK base about 4,000 kilometers away; none reached their target, and NATO air defences intercepted several ballistic missiles launched from Iran in March.
Military analysts remain cautious about the scale of the threat. Sidharth Kaushal of the Royal United Services Institute said the threat to Europe is 'real, but limited' because accuracy and payload decline at longer ranges. Douglas Barrie of the International Institute for Strategic Studies noted Iran has weapons with ranges above 2,000 kilometers but the risk of failure or interception remains. Iran's supreme leader last week elevated hardliners to top security and military posts, appointing former Guards commander Mohsen Rezaei as the country's top security official, a move analysts say signals a shift away from negotiations.
Financial markets are already reflecting renewed geopolitical stress. European equity funds attracted $13.52 billion in the week through Aug. 12, the strongest weekly inflow since early July and about 73% of the $18.62 billion that moved into global equity funds, according to LSEG Lipper data reported by Reuters. Technology funds recorded about $1.7 billion in outflows as investors rotated from expensive U.S. tech into European assets, where STOXX 600 companies are expected to deliver roughly 24% earnings growth for the current reporting season. The STOXX 600 has pulled back from recent highs, closing near a three-week low on Wednesday as Brent crude traded near $93 per barrel, with energy stocks outperforming while travel shares weakened.
For crypto and other risk assets, the escalation threat adds a layer of macro uncertainty: higher oil and gas prices could increase inflation pressure, weigh on consumer and travel companies, and complicate the outlook for interest rates. Investors are not yet treating an attack on Europe as imminent, but the combination of stalled diplomacy, military signaling and firmer energy prices is keeping risk sentiment fragile.
