The end-Triassic mass extinction (ETME) was associated with intensified deep-water anoxia in epicontinental seas and mid-depth waters, yet the absolute oxygenation state in the shallow ocean is uncharacterized. Here we report carbonate-associated iodine data from the peritidal Mount Sparagio section (Southern Italy) that documents the ETME (~ 200 Ma) in the western Tethys. We find a sharp drop in carbonate I/(Ca + Mg) ratios across the extinction horizon and persisting into the Early Jurassic. This records local dissolved oxygen and iodate decline in the near-surface ocean of low-latitude Tethys due to the development of depleted oxygen concentrations. Consequently, during the ETME even shallow-water animals, such as the megalodonts seen at Mount Sparagio, were likely the victims of oxygen-poor conditions. The shallow ocean deoxygenation coincides with the synchronous spread of deeper anoxic waters and widespread anoxic deposition on continental shelves and slopes. An upwards expansion of the mid-water oxygen minimum zone in the latest Triassic shoaled the oxycline and triggered a major marine crisis. •I/(Ca + Mg) profile in a Triassic–Jurassic boundary shallow water carbonate succession of the western Tethys•Water column hypoxic conditions in the peritidal marine realm during the end-Triassic mass extinction•Oxygen decline was synchronous with the sudden local loss of benthic macrofauna•Shallow ocean deoxygenation driven by hyperthermal conditions and upwards expansion of mid-depth oxygen minimum zone