The escalating generation of industrial waste alongside the growing demand for high-performance, environmentally sustainable drilling fluids presents critical challenges to the oil and gas sector. Conventional drilling fluid additives are predominantly synthesized from virgin materials, contributing to resource depletion and environmental burden. Objectives: This study pioneers a circular economy approach by synthesizing silica nanoparticles (SiO2NPS) and alumina nanoparticles (Al2O3NPs) entirely from locally sourced industrial waste — bentonite clay and aluminum scrap, respectively — and evaluating their performance as functional additives in water-based drilling fluids (WBDFs). Novelty: To the best of our knowledge, this represents the first integrated investigation combining simultaneous waste-derived synthesis of both SiO₂ and Al₂O₃ NPs with comprehensive drilling fluid performance assessment under both LTLP and HTHP conditions, within a unified circular economy framework. Methodology: The synthesized nanomaterials were thoroughly characterized using X-ray diffraction (XRD), Fourier-transform infrared spectroscopy (FTIR), field-emission scanning electron microscopy (FE-SEM), and atomic force microscopy (AFM). Five nanoparticle concentrations (0.5–4.0 wt%) were screened, with 3 wt% identified as optimal. Rheological parameters, filtration characteristics, and shale inhibition capacity were then evaluated under low-temperature low-pressure (LTLP) and high-temperature high-pressure (HTHP) conditions. Key Results: At the optimal concentration of 3 wt%, silica nanoparticles reduced filtrate volume by 40% under LTLP and 38.6% under HTHP conditions, while increasing yield point by 75% and reducing plastic viscosity by 17.4%. Alumina nanoparticles achieved comparable, yet slightly lower, improvements. Shale swelling was suppressed by 60.7% (SiO2NPS) and 57.1% (Al2O3NPs) over 24 h, and the coefficient of friction was reduced by 34.4% and 25.0%, respectively. Conclusions: This work validates the technical and environmental viability of waste-derived nanomaterials as high-performance, eco-friendly WBDF additives, providing a sustainable pathway for improving drilling efficiency and wellbore stability in challenging shale formations while simultaneously contributing to industrial waste valorization.