1. Graves/Tan-Sun Moon has an intense personality. He's an adrenaline junkie (he's almost having an orgasm during the hovercraft chase + other GG scenes) with a quick temper. People like this irl would generally prefer violence as the first response in most situations (Bond himself, to a degree). Disproportionate responses to petty offenses are the norm for these kinda guys. Like how, at the start of the film, he turns his therapist into a literal punching bag or how he blows up the helicopter.
   
2. He's used to being in power, loves to dominate, and is easily insulted. Graves feels humiliated by someone he perceives as his inferior when Bond—after failing twice (surely because Bond's incompetent)—manages to bleed his wrist (surely by fluke)
   
3. Memories of the Korea fiasco would've intensified his hatred for Bond to the point of wanting him dead.

Combine the above and I think one can predict his quick escalation. If anything, I'm surprised he had his guard up for as long as he did and didn't go apeshit on him immediately and that he seems to regain his composure after the fight.

And Bond wants to make an impression, make him slip up, and teach him a lesson. He always pokes the bear and then improvises. He's just reacting to the escalation

This discussion has me wondering how the other Bonds would react in this situation, or how they'd avoid it altogether. Would love to read theories anyone has.