La$_2$O$_3$Fe$_2$Se$_2$ can be explained in terms of Mott localization in sharp contrast with the metallic behavior of FeSe and other parent parent compounds of iron superconductors. We demonstrate that the key ingredient that makes La$_2$O$_3$Fe$_2$Se$_2$ a Mott insulator, rather than a correlated metal dominated by the Hunds coupling is the enhanced crystal-field splitting, accompanied by a smaller orbital-resolved kinetic energy. The strong deviation from orbital degeneracy introduced by the crystal-field splitting also pushes this materials close to an orbital-selective Mott transition. We predict that either doping or uniaxial external pressure can drive the material into an orbital-selective Mott state, where only one or few orbitals are metallized while the others remain insulating.
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