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The formation of elongated zirconium hydride platelets during corrosion of nuclear fuel clad is linked to its premature failure due to embrittlement and delayed hydride cracking. Despite their importance, however, most existing models of hydride nucleation and growth in Zr alloys are phenomenological and lack sufficient physical detail to become predictive under the variety of conditions found in nuclear reactors during operation. Moreover, most models ignore the dynamic nature of clad oxidation, which requires that hydrogen transport and precipitation be considered in a scenario where the oxide layer is continuously growing at the expense of the metal substrate. In this paper, we perform simulations of hydride formation in Zr clads with a moving oxide/metal boundary using a stochastic kinetic diffusion/reaction model parameterized with state-of-the-art defect and solute energetics. Our model uses the solutions of the hydrogen diffusion problem across an increasingly-coarse oxide layer to define boundary conditions for the kinetic simulations of hydrogen penetration, precipitation, and dissolution in the metal clad. Our method captures the spatial dependence of the problem by discretizing all spatial derivatives using a stochastic finite difference scheme. Our results include hydride number densities and size distributions along the radial coordinate of the clad for the first 1.6 h of evolution, providing a quantitative picture of hydride incipient nucleation and growth under clad service conditions.