Abstract The severity of droughts is expected to increase with climate change, leading to more frequent tree mortality and a decline in forest ecosystem services. Consequently, there is an urgent need for monitoring networks to provide early warnings of drought impacts on forests. Dendrometers capturing stem diameter variations may offer a simple and relatively low-cost opportunity. However, the links between stem shrinkage, a direct expression of tree water deficit (TWD), and hydraulic stress are not well understood thus far. In this study, we exposed two widespread conifers Pinus sylvestris and Larix decidua to lethal dehydration by withholding water and closely monitored TWD, midday water potential ($\psi $), and midday stomatal conductance ($g_{s}$) under controlled greenhouse conditions. We found strong relationships between the three variables throughout the dehydration process, particularly suggesting the potential for continuous $\psi $ predictions and stomatal closure assessments. However, the relationships decoupled during recovery from severe drought. We also identified TWD thresholds that signal the onset of drought stress and tissue damage, providing insights into stress impacts and recovery potential. While these findings are promising, challenges remain in practically transferring them to field set-ups by suitable TWD normalization. Importantly, we observed that midday $g_{s}$ was drastically reduced when TWD persisted overnight, providing a directly applicable drought stress signal that does not require normalization. In conclusion, while challenges remain, our results highlight the potential of dendrometers for monitoring tree water dynamics. Implementing dendrometer networks could support the development of early-warning metrics for drought impacts, enabling large-scale monitoring in diverse settings, such as urban areas and forest ecosystems.