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We combine optical spectroscopy and first-principles electronic structure calculations to reveal the microscopic character of the charge gap in polar magnet Fe₂Mo₃O₈. Iron occupation on the octahedral site draws the gap strongly downward compared to the Zn parent compound, whereas occupation on the tetrahedral site creates a narrow resonance near the Fermi energy that emanates from a flat Mott-like state due to screening of the local moment - similar to expectations for a Zhang-Rice singlet. We discuss this unusual hybridization in terms of orbital occupation and character as well as the structure-property relationships that can be unveiled in various metal-substituted systems (Ni, Mn, Co, Zn).