The expansion of reservoirs to cope with droughts and water shortages is hotly debated in many places around the world. We argue that there are two counterintuitive dynamics that should be considered in this debate: supply–demand cycles and reservoir effects. Supply–demand cycles describe instances where increasing water supply enables higher water demand, which can quickly offset the initial benefits of reservoirs. Reservoir effects refer to cases where over-reliance on reservoirs increases vulnerability, and therefore increases the potential damage caused by droughts. Here we illustrate these counterintuitive dynamics with global and local examples, and discuss policy and research implications.