It's more to stop the sun glinting off the front sight post. It does also protect the sight from knocks which is extra important if it's driftable.
With a rear peep sight the front sight hood also forms a "ghost ring" that helps you quickly and instinctively place the front sight in the centre of the peephole, that way you can get good accuracy even with a large peephole, a real help in low light.
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