The stability of isolated extraframework Fe2+ ions in ZSM-5 zeolite and their reactivity in the benzene to phenol oxidation were studied by periodic DFT calculations. Mononuclear iron(II) cations can only be stabilized at very specific exchange sites of ZSM-5 zeolite. Accordingly, iron will be predominantly present as oxygenated/hydroxylated mono- and binuclear iron complexes in Fe/ZSM-5. The reactivity of isolated Fe2+ does not depend on the local coordination environment around iron, whereas the steric constraints imposed by the zeolite lattice are important for the overall catalytic reactivity. [FeO]+, [HOFe(µ-O)FeOH]2+, [Fe(µ-O)2Fe]2+, [Fe(µ-O)Fe]2+ extraframework complexes are also potential sites for benzene activation. The reaction is however not catalytic in these cases because the vacant active site cannot be regenerated. The presence of basic extraframework O ligands in these complexes favors phenol dissociation resulting in the formation of stable grafted phenolate species, and ultimately, to the deactivation of the oxygenated iron complexes. Graphical abstract A periodic DFT study of the oxidation of benzene to phenol with N2O by Fe/ZSM-5 zeolite has been carried out. The reaction is only catalytic over isolated Fe(II) cations. Mononuclear Fe(III) and binuclear Fe(II) and Fe(III) complexes also activate N2O and benzene but lead to grafted phenolates that deactivate these iron sites. Highlights ¿ Isolated Fe2+ ions in ZSM-5 are the active species for catalytic oxidation of benzene to phenol. ¿ The reactivity of isolated Fe2+ sites does not depend on their local geometrical environment. ¿ The isolated Fe2+ active sites can only be stabilized at few locations in ZSM-5. ¿ Alternative mono- and binuclear Fe sites deactivate through the formation of grafted phenolates.