"...decide it's an error.."
No, it is an "optimizing" compiler not a "correcting" compiler. The optimizer can detect that no language defined semantic will be changed by removing the code, so it does. As others have noted, "volatile" is the fix for this particular coding / compiler blunder. However ill-defined, it is *not an error*.
As for the folks commenting that only C can run in small embedded processors that's hogwash. Huge mainframes of the early ages had smaller memory sizes and ran FORTRAN (now Fortran, but then it was all caps), COBOL, PL/I (and .8 for IBM internals), Algol and other languages. Most made entire classes of C blunders impossible, and there is no fundamental reason why we couldn't go back to safer languages for embedded programming (and good reasons why we ought to; not that I expect we shall).