Iodine cycling in the ocean is closely linked to productivity, organic carbon export, and oxygenation. However, iodine sources and sinks at the seafloor are poorly constrained, which limits the applicability of iodine as a biogeochemical tracer. We present pore water and solid phase iodine data for sediment cores from the Peruvian continental margin, which cover a range of bottom water oxygen concentrations, organic carbon rain rates and sedimentation rates. By applying a numerical reaction‐transport model, we evaluate how these parameters determine benthic iodine fluxes and sedimentary iodine‐to‐organic carbon ratios (I:Corg) in the paleo‐record. Iodine is delivered to the sediment with organic material and released into the pore water as iodide (I−) during early diagenesis. Under anoxic conditions in the bottom water, most of the iodine delivered is recycled, which can explain the presence of excess dissolved iodine in near‐shore anoxic seawater. According to our model, the benthic I− efflux in anoxic areas is mainly determined by the organic carbon rain rate. Under oxic conditions, pore water dissolved I− is oxidized and precipitated at the sediment surface. Much of the precipitated iodine re‐dissolves during early diagenesis and only a fraction is buried. Particulate iodine burial efficiency and I:Corg burial ratios do increase with bottom water oxygen. However, multiple combinations of bottom water oxygen, organic carbon rain rate and sedimentation rate can lead to identical I:Corg, which limits the utility of I:Corg as a quantitative oxygenation proxy. Our findings may help to better constrain the ocean's iodine mass balance, both today and in the geological past.