Droughts have a significant impact on surface water resources, especially in arid and semi-arid regions. Computational and data handling limitations have constrained previous time-series analyses. However, advances in cloud computing services and remote sensing technology allow for a more detailed examination. This study integrates multi-source satellite-derived data with a cloud computing platform to assess the impact of long-term drought on surface water and water balance in Iran from 2000 to 2021. Given the varying effects of drought on highlands and lowlands, the analysis was conducted at three levels: the entire country, the highlands, and the lowlands. The results of this study reveal imbalances between water balance from 2000 to 2021, with notable disparities observed during 2000–2007, 2009–2014, and 2016–2019. The results also show varying drought trends (e.g., −1.22 in 2000 and −0.73 in 2021), with severe conditions captured in 2008 (SPI: −1.92). Additionally, our analysis illustrated that lowlands were more impacted by droughts compared to highlands. Long-term drought and permanent surface water had correlation values of 0.33 across the country, 0.33 in the highlands, and 0.31 in the lowlands. For seasonal surface water, coefficients were 0.18 for the entire country, 0.16 for the highlands, and 0.18 for the lowlands. Overall, long-term drought had minimal effect on reducing surface water. These findings show that drought is only part of the explanation for the decrease in surface water resources.