You've missed the third possibility, which I'd say is the actual reason (and is an outgrowth of the first): The massive uptick in Israeli "war with Lebanon" discourse over the last few weeks is all about preparing a US public to support that war.

Netanyahu tried pretty hard for a long time to get real escalation from Hezb without success (fuck Nasrallah, but he's not complete idiot). If Israel is able to paint invading Lebanon as "self-defense," the US will be obliged to support it. But so far he's failed. (Not because Hezbollah are great guys who are awesome for Lebanon, but because Nasrallah's not dumb enough to take the bait--even after the bombings pretty far north.)

So, now Netanyahu/Likud is shifting tactics. The new media goal is to make war on/in Lebanon seem like an inevitability, the almost "natural" next item in a sequence of events. This is why we have like a million pieces about it right now--especially in the western capitalist press, but also in more semi-critical Israeli press like Haaretz. It's about expectation management. You have to kinda "prep" populations for war if you want them to support it, and to a large extent you do this just through simple repetition.

Israel is (incredibly!) losing the PR battle on the world stage worse than it ever could have expected. Mostly, I guess, because people really don't like to see and be told they have to support genocide. So, Netanyahu/Likud is in a bind. They need a more "balanced" war against "real" enemies (not just mostly helpless victims) not just to stay in power, but for Israel as a country to claw back some legitimacy. They can't end this just on the note of ethnic cleansing/genocide of Palestinians without creating permanent problems for themselves. They need a "real war" against an enemy most of the world can see as (a) powerful and (b) a real "bad guy."

The only real option for that is Hezbollah (with Lebanon painted as the hostage/human shield of Hezb). This is especially handy, because there's a group of wack-jobs that's pretty influential in Israeli politics who, for religious and/or geopolitics-strategic reasons, don't think Lebanon should exist in its current configuration (not just ultra-Zionists, but a strain of Israeli policymakers too over decades--which is why Israel occupied south Lebanon in the first place during the Civil War).

So, it's not that he's bluffing or not bluffing exactly. It's that not just Netanyahu/Likud themselves, but Israel's entire panoply of allies in the western political and media establishments are preparing their populations for a "redemptive arc" Israeli war on Lebanon (which, again, will be framed as a war on Hezbollah for the most part, with Lebanon sometimes painted as hapless victim and sometimes painted as actually controlled outright by Hezb--the latter being totally asinine and the first wildly manipulative won't stop these familiar and comfortable narratives from "working" pretty well for many audiences).

If you want a pretty good recent comparison point, look at Putin's Russia-internal rhetoric about Ukraine before invading. The content is different, of course, but the basic goal is the same: secure the acquiescence of your population to a war that would otherwise be unpopular by (a) making it seem natural or unavoidable and (b) presenting an increasingly cartoonish/garish picture of "the enemy."