The Spent Nuclear Fuel (SNF) cladding serves as the first barrier that prevents the release of radioactive materials. It is very important to maintain cladding integrity in SNF management. It is known that the pinch load applied to the cladding can lead to Mode-3 failure and the cladding becomes more vulnerable to this failure mode with the existence of radial hydrides and other forms of mechanical defects. In this study, a numerical analysis process was proposed to scientifically and systematically evaluate the fracture resistance of cladding with reoriented hydrides under pinch load. The mechanical behavior and fracture of the irradiated cladding under pinch load can be evaluated by Ring Compression Test (RCT). Under the stress field generated by RCT, the cracks propagate more easily through radial hydrides than circumferential hydrides. The δ-hydride which form within the α-zirconium matrix causes a large expansion strain due to the volume difference and voids form at the interface between the hydride and the zirconium matrix. Chan demonstrated that the load needed to form voids and separate the hard hydride precipitates from the Zr matrix is considerably lower than that which initiates brittle fracture of hydrides using a micro-cantilever test. Therefore, we propose a microstructure crack propagation analysis method based on Continuum Damage Mechanics (CDM) that can simulate fracture of hydride, zirconium matrix, and Zr/hydride interface. CDM is possible to simulate the hydride, zirconium matrix, and interface cracking in a continuum model based on cladding deformation. The RCT simulation model was constructed from the microscopic images of irradiated cladding. A pixel-based finite element model was created by separating the hydride, zirconium matrix, and interface using the image segmentation method on a morphology operation basis. The appropriate element size was selected for the efficiency of the analysis and crack propagation using CDM. The force-displacement curves and strain energy from RCT were compared and analyzed with the simulation results of different element sizes. The finalized RCT simulation model can be used to evaluate the fracture resistance of the irradiated cladding under the quantified pinch load and to establish the failure criterion of fuel rods under pinch load. The advantages and limitations of the proposed process are discussed.