Global climate models suggest an increase in evapotranspiration, changing storm tracks, and moisture delivery in many parts of the world, which are likely to cause more prolonged and severe drought, yet the weakness of climate models in modeling persistence of hydroclimatic variables and the uncertainties associated with regional climate projections mean that impact assessments based on climate model output may underestimate the risk of multiyear droughts. In this paper, we propose a vulnerability‐based approach to test water resource system response to drought. We generate a large number of synthetic streamflow series with different drought durations and deficits and use them as input to a water resource system model. Marginal distributions of the streamflow for each month are generated by bootstrapping the historical data, while the joint probability distributions of consecutive months are constructed using a copula‐based method. Droughts with longer durations and larger deficits than the observed record are generated by perturbing the copula parameter and by adopting an importance sampling strategy for low flows. In this way, potential climate‐induced changes in monthly hydrological persistence are factored into the vulnerability analysis. The method is applied to the London water system (England) to investigate under which drought conditions severe water use restrictions would need to be imposed. Results indicate that the water system is vulnerable to drought conditions outside the range of historical events. The vulnerability assessment results were coupled with climate model information to compare alternative water management options with respect to their vulnerability to increasingly long and severe drought.