Marcasite crystal structures show an interesting interplay of spin, orbital, and lattice degrees of freedom and host properties relevant for applications and fundamental science. Electronic correlations that arise in this context are critical for tuning conductivity which is of interest in electrochemical reactions in catalysis but are also important to understand high values of cryogenic thermopower in materials with 3d orbitals related to classical rare earth Kondo semiconductors. Here we show, by magnetic susceptibility, transport, thermodynamic, and X-ray absorption spectroscopy at Fe L2,3 edge measurements, that intermetallic marcasite FeP 2 exhibits a cascade of thermally induced spin-state transitions on cooling and a ground state with an energy gap due to d−p orbital hybridization. A small amount of P vacancy defects enhances conduction, giving rise to semimetal. The electronic structure calculations indicate the importance of strong electronic correlations and the nonlocal Coulomb interaction beyond local density approximation dynamical mean field theory. Our results point to a possibility of Hunds rule and crystal field competitioninduced orbital degeneracy lifting similar to that observed in LaCoO 3 perovskite. A relatively simple unit cell offers possibilities for further computationally guided modification of unconventional energy gap and atomic-defect-related conduction.