The energy level positions in the optical gap and atomic geometry for the Fe⁴⁺ impurity substituting for a host Ti atom in SrTiO₃ are calculated using the Unrestricted Hartree-Fock (UHF) method and supercells containing up to 320 atoms. In agreement with experiment, the high spin (S=2) state is much lower in energy than the zero-spin state. The energy level positions strongly depend on the asymmetric displacements of six nearest O ions which is a combination of the Jahn-Teller and breathing modes. A considerable covalent bonding between the Fe ion and four nearest O ions takes place. We predict a strong dependence of optical absorption energies on the crystal compression or internal tension, e.g. in perovskite solid solutions.