One of the main degradation mechanisms of the zirconium alloys used in nuclear reactors is hydrogen embrittlement and hydride formation. The formation of zirconium hydrides is accompanied by a transformation strain, the effects of which on the development of localized deformation zones are not well-understood. This study uses a crystal plasticity finite element model that is coupled with diffusion subroutines to quantify such effects. For this purpose, a zirconium specimen was hydrided in the absence of any external mechanical loads. With the use of electron backscatter diffraction, the rotation fields around interacting intragranular hydrides as well as those located at grain boundaries or triple points were measured at a high spatial resolution. The as-measured zirconium and hydride morphologies were mapped to the model for numerical simulation. Both numerical and experimental results show that hydride precipitation induces large rotation fields within the zirconium matrix, where such rotations are at their maximum in the vicinity of hydride tips. While the crystallographic orientations and shapes of hydrides affect the magnitude of rotation fields, both experimental and modeling results revealed the development of discrete and parallel geometrically necessary dislocation fields and a strong interaction among neighboring hydrides. It is shown that the stress field resulting from hydride precipitation affects the patterning of hydrogen distribution, which in return affects further hydride interlinking.