Unreal Engine 5 includes a set of tools for simulating 2D and 3D fluid effects in real time. These systems use physically-based simulation methods to produce realistic effects for things such as fire, smoke, clouds, rivers, splashes, and waves breaking on a beach.
The toolset is designed to be artist-friendly and an open platform for experimentation by utilizing simulation stages, reusable modules, and robust Data Interfaces.
Artists can achieve their desired results in real time by modifying only a few parameters, while advanced users and R&D engineers can dive in and break apart the simulators to try new algorithms.
You can learn more about Niagara and Fluid Simulation by going to the Niagara VFX System documentation.
This page provides a starting point to learn about fluid simulation in Unreal Engine.