Abstract: Urban metro tunnels are generally shallow-buried, and the loess strata they pass through are highly water-sensitive, making them prone to surface settlement and even collapse under the action of water. Focusing on the influence of the shield tail gap on settlement in loess strata, model tests were conducted to investigate stratum deformation, ground loss, and surface settlement under different moisture contents. Based on the sink–source method (moving-focus model) and experimental data, a modified calculation method for the ground loss ratio (η) and the distance from the focus to the tunnel center (d) in water-sensitive loess strata is proposed. The results indicate that at low water content, the construction disturbance is minimal; however, as water content increases, both the range and magnitude of stratum deformation expand significantly. Notably, the focus position of the final tunnel state varies drastically: it lies near the tunnel radius at low water content but shifts to the tunnel center under high water content conditions. Furthermore, a critical threshold effect is observed where the ground loss ratio increases from negligible to a peak value following a power-function relationship as water content rises from 8.2% to 22.3%. The proposed settlement prediction formula, incorporating water content correction factors, is validated against existing models and engineering data, demonstrating superior accuracy. This research provides a theoretical basis for predicting and controlling settlement in water-rich loess tunnelling.