MIRI/MRS on board the JWST allows us to probe the inner regions of protoplanetary disks. Here we examine the disk around the classical T Tauri star Sz 98, which has an unusually large dust disk in the millimetre with a compact core. We focus on the H$_2$O emission through both its ro-vibrational and pure rotational emission. Furthermore, we compare our chemical findings with those obtained for the outer disk from Atacama Large Millimeter/submillimeter Array (ALMA) observations. In order to model the molecular features in the spectrum, the continuum was subtracted and LTE slab models were fitted. The spectrum was divided into different wavelength regions corresponding to H$_2$O lines of different excitation conditions, and the slab model fits were performed individually per region. We confidently detect CO, H$_2$O, OH, CO$_2$, and HCN in the emitting layers. The isotopologue H$^{18}_2$O is not detected. Additionally, no other organics, including C$_2$H$_2$, are detected. This indicates that the C/O ratio could be substantially below unity, in contrast with the outer disk. The H$_2$O emission traces a large radial disk surface region, as evidenced by the gradually changing excitation temperatures and emitting radii. The OH and CO$_2$ emission are relatively weak. It is likely that H$_2$O is not significantly photodissociated; either due to self-shielding against the stellar irradiation, or UV-shielding from small dust particles. The relative emitting strength of the different identified molecular features point towards UV-shielding of H$_2$O in the inner disk of Sz 98, with a thin layer of OH on top. The majority of the organic molecules are either hidden below the dust continuum, or not present. In general, the inferred composition points to a sub-solar C/O ratio (<0.5) in the inner disk, in contrast with the larger than unity C/O ratio in the gas in the outer disk found with ALMA.