By Peter Nurse

Investing.com - European stock markets weakened Wednesday, with fresh hawkish comments from a Federal Reserve official prompting caution.

By 04:20 ET (08:20 GMT), the DAX in Germany traded 0.3% lower, the CAC 40 in France fell 0.2%, and U.K.’s FTSE 100 dropped 0.5%.

“It’s very clear” the Fed has to tighten monetary policy, Federal Reserve Bank of Minneapolis President Neel Kashkari said Tuesday in Minneapolis. “When inflation is 8% or 9%, we run the risk of unanchoring inflation expectations and leading to very bad outcomes.”

These comments, the latest of a series of hawkish Fed speeches, mean investors are wary ahead of the central bank gathering at Jackson Hole in Wyoming later in the week, expecting Fed chair Jerome Powell to deliver an aggressive tightening message and dash hopes for a rate cut next year.

Back in Europe, inflation is nearing double digits, gas prices are soaring as the war in Ukraine becomes six months old, while Eurozone business activity contracted for a second straight month in August, suggesting a recession is looming.

In corporate news, Lookers (LON:LOOK) stock rose 2.7% after the online car dealership reported a relatively strong first half for 2022 despite the ongoing weakness of the U.K. auto market.

Oil prices gained Wednesday, bouncing back after early losses as doubts grow over the possibility of Iranian oil reentering the global market.

Iran will not allow inspections beyond what is in a 2015 nuclear deal, the country's nuclear chief said on Wednesday, potentially scuppering a deal to revive Tehran's nuclear deal with world powers.

The U.S. is shortly set to respond to a draft agreement proposed by the European Union that would bring back the 2015 nuclear deal with Iran, potentially allowing Iran to export its crude onto the global market.

Also helping the tone was Tuesday’s data from the American Petroleum Institute, an industry body, showed that U.S. crude inventories fell by 5.6 million barrels in the week to Aug. 19, far more than expectations for a drawdown of 450,000 barrels. Official data are due later on Wednesday.

The market had sold off early as traders reassessed the chances of an imminent output cut by the Organization of the Petroleum Exporting Countries and allies, a group known as OPEC+.

By 03:20 ET, U.S. crude futures traded 1.1% higher at $94.72 a barrel, while the Brent contract rose 1.1% to $101.31. Both benchmarks gained just short of 4% during the previous session.

Additionally, gold futures rose 0.1% to $1,762.10/oz, while EUR/USD traded 0.2% lower at 0.9952.