This research examines the dynamics of drought and water depletion in Haditha Lake, Iraq, through satellite imagery of Sentinel-2 and GIS-based analysis in 2021-2026. The evaluation is a combination of the Normalized Difference Water Index (NDWI) and the Normalized Difference Vegetation Index (NDVI) to measure the spatiotemporal variations of the surface water and vegetation response. The findings indicate significant interannual variability, with an initial decrease in water-related indicators (−12%), and a further more drastic decrease (−30%), suggesting the aggravation of drought and significant water loss. There is a partial recovery period in the following years (+12% and +8%), indicating temporary positive changes in hydrological conditions, probably associated with seasonal rainfall variability. Nevertheless, there is a steep fall in the last year (−35%), as the drought stress is extreme, and water sources are highly depleted. The NDWI analysis shows distinct contraction and expansion trends of water extent and NDVI findings indicate that vegetation health is largely dependent on water supply. Low water levels are linked with vegetation stress, fragmentation, and low greenness, and enhanced water conditions are linked to vegetation recovery. Remote sensing indices coupled with GIS is useful in tracking the effects of droughts and identifying any changes in the environment. In general, the results demonstrate the susceptibility of Haditha Lake to climatic variability and water deficit, and the necessity of sustainable water resource management and constant monitoring to reduce the effects of droughts in the future.