Summary The onset of stomatal closure reduces transpiration during drought. In seed plants, drought causes declines in plant water status which increases leaf endogenous abscisic acid (ABA) levels required for stomatal closure. There are multiple possible points of increased belowground resistance in the soil–plant atmospheric continuum that could decrease leaf water potential enough to trigger ABA production and the subsequent decreases in transpiration. We investigate the dynamic patterns of leaf ABA levels, plant hydraulic conductance and the point of failure in the soil–plant conductance in the highly embolism‐resistant species Callitris tuberculata using continuous dendrometer measurements of leaf water potential during drought. We show that decreases in transpiration and ABA biosynthesis begin before any permanent decreases in predawn water potential, collapse in soil–plant hydraulic pathway and xylem embolism spread. We find that a dynamic but recoverable increases in hydraulic resistance in the soil in close proximity to the roots is the most likely driver of declines in midday leaf water potential needed for ABA biosynthesis and the onset of decreases in transpiration.