White matter hyperintensities of presumed vascular origin are frequently observed on magnetic resonance imaging in normal aging. They are typically found in cerebral small vessel disease and suspected culprits in the etiology of complex age- and small vessel disease-related conditions, such as late-onset depression. White matter hyperintensities may interfere with surrounding white matter metabolic demands by disrupting fiber tract integrity. Meanwhile, risk factors for small vessel disease are thought to reduce tissue oxygenation, not only by reducing regional blood supply, but also by impairing capillary function. To address white matter oxygen supply–demand balance, we estimated voxel-wise capillary density as an index of resting white matter metabolism, and combined estimates of blood supply and capillary function to calculate white matter oxygen availability. We conducted a cross-sectional study with structural, perfusion- and diffusion-weighted magnetic resonance imaging in 21 patients with late-onset depression and 21 controls. We outlined white matter hyperintensities and used tractography to identify the tracts they intersect. Perfusion data comprised cerebral blood flow, blood volume, mean transit time and relative transit time heterogeneity—the latter a marker of capillary dysfunction. Based on these, white matter oxygenation was calculated as the steady state cerebral metabolic rate of oxygen under the assumption of normal tissue oxygen tension and vice versa. The number, volume and perfusion characteristics of white matter hyperintensities did not differ significantly between groups. Hemodynamic data showed white matter hyperintensities to have lower blood flow and blood volume, but higher relative transit time heterogeneity, than normal-appearing white matter, resulting in either reduced capillary metabolic rate of oxygen or oxygen tension. Intersected tracts showed significantly lower blood flow, blood volume and capillary metabolic rate of oxygen than normal-appearing white matter. Across groups, lower lesion oxygen tension was associated with higher lesion number and volume. Compared with normal-appearing white matter, tissue oxygenation is significantly reduced in white matter hyperintensities as well as the fiber tracts they intersect, independent of parallel late-onset depression. In white matter hyperintensities, reduced microvascular blood volume and concomitant capillary dysfunction indicate a severe oxygen supply–demand imbalance with hypoxic tissue injury. In intersected fiber tracts, parallel reductions in oxygenation and microvascular blood volume are consistent with adaptations to reduced metabolic demands. We speculate, that aging and vascular risk factors impair white matter hyperintensity perfusion and capillary function to create hypoxic tissue injury, which in turn affect the function and metabolic demands of the white matter tracts they disrupt.