M33 X-7 is the only known eclipsing black hole high mass X-ray binary. The system is reported to contain a very massive O supergiant donor and a massive black hole in a short orbit. The high X-ray luminosity and its location in the metal-poor galaxy M33 make it a unique laboratory for studying the winds of metal-poor donor stars with black hole companions and it helps us to understand the potential progenitors of black hole mergers. Using phase-resolved simultaneous HST- and XMM-Newton-observations, we traced the interaction of the stellar wind with the black hole. We observed a strong Hatchett-McCray effect in M33 X-7 for the full range of wind velocities. Our comprehensive spectroscopic investigation of the donor star (X-ray+UV+optical) yields new stellar and wind parameters for the system that differ significantly from previous estimates. In particular, the masses of the components are considerably reduced to ≈38 M⊙ for the O-star donor and ≈11.4 M⊙ for the black hole. The O giant is overfilling its Roche lobe and shows surface He enrichment. The donor shows a densely clumped wind with a mass-loss rate that matches theoretical predictions. An extended ionization zone is even present during the eclipse due to scattered X-ray photons. The X-ray ionization zone extends close to the photosphere of the donor during inferior conjunction. We investigated the wind-driving contributions from different ions and the changes in the ionization structure due to X-ray illumination. Toward the black hole, the wind is strongly quenched due to strong X-ray illumination. For this system, the standard wind-fed accretion scenario alone cannot explain the observed X-ray luminosity, pointing toward an additional mass overflow, which is in line with our acceleration calculations. The X-ray photoionization creates an He II emission region around the system emitting ∼1047 ph s−1. We computed binary evolutionary tracks for the system using MESA. Currently, the system is transitioning toward an unstable mass transfer phase, possibly resulting in a common envelope of the black hole and the O-star donor. Since the mass ratio is q ≳ 3.3 and the period is short, the system is unlikely to survive the common envelope, but will rather merge. Based on observations made with the NASA/ESA Hubble Space Telescope (HST), obtained from the data archive at the Space Telescope Science Institute. STScI is operated by the Association of Universities for Research in Astronomy, Inc. under NASA contract NAS 5-26555. These observations are associated with the GO program 15636. Based on observations obtained with XMM-Newton, an ESA science mission with instruments and contributions directly funded by ESA Member States and NASA, these observations are associated with id numbers 0831590201 & 0831590401.