Global warming presents a significant threat to the sustainability of agricultural systems, demanding increased irrigation to mitigate the impacts of prolonged dry seasons. Efficient water management strategies, including deficit irrigation, have thus become essential, requiring continuous crop monitoring. However, conventional monitoring methods are laborious and time-consuming. This study investigates the potential of aerial imagery captured by unmanned aerial vehicles (UAVs) to predict critical water stress indicators—relative water content (RWC), midday leaf water potential (ΨMD), stomatal conductance (gs)—as well as the pigment content (chlorophyll ab, chlorophyll a, chlorophyll b and carotenoids) of trees in an olive orchard. Both thermal and spectral vegetation indices are calculated and correlated using linear and exponential regression models. The results reveal that the thermal vegetation indices contrast in estimating the water stress indicators, with the Crop Water Stress Index (CWSI) demonstrating higher precision in predicting the RWC (R2 = 0.80), ΨMD (R2 = 0.61) and gs (R2 = 0.72). Additionally, the Triangular Vegetation Index (TVI) shows superior accuracy in predicting the chlorophyll ab (R2 = 0.64) and chlorophyll a (R2 = 0.61), while the Modified Chlorophyll Absorption in Reflectance Index (MCARI) proves most effective for estimating the chlorophyll b (R2 = 0.52). This study emphasizes the potential of UAV-based multispectral and thermal infrared imagery in precision agriculture, enabling assessments of the water status and pigment content. Moreover, these results highlight the vital importance of this technology in optimising resource allocation and enhancing olive production, critical steps towards sustainable agriculture in the face of global warming.