The extent of phase separation and water percolation in sulfonated membranes are the key to their performance in fuel cells. Toward this, the effect of hydration on the morphology and transport characteristics of sulfonated poly(ether ether ketone), sPEEK, membrane is investigated using atomistic molecular dynamics simulation at various hydration levels(λ: number of water molecules per sulfonate group). The evolution of local morphology is investigated using structural correlations and minimum pair distances. Transport properties are probed using mean squared displacements and diffusion coefficients. The water-sulfonate interaction in sPEEK is found to be stronger than that in Nafion, as observed in experiments. Analyses indicate the presence of narrow connected path of water and hydronium at λ = 4 and large domains, spanning half the simulation box, at λ = 15. The behavior of membrane water remains far from bulk as indicated by its diffusion coefficient. The persistence of small isolated water clusters demonstrates the extent of phase separation in sPEEK to be lesser than that in Nafion. Analyses at molecular and collective levels suggest the occurrence of a percolation transition between λ = 8 and 10, which leads to a connected network of water channels in the membrane, thereby boosting the hydronium mobility.