So do you think the Iranian has thrown the sterring wheel out the window?
In the sense that he's settled on the defect option, no. He still may back away from the brink. (If Iranians did in fact fire a missile at Israel, that answer would change.) But I posted the payoff matrix for the game Chicken just as an example. I don't think it applies to the current situation. Specifically, I don't believe that mutual defection (which in this case would be: Iran remains intransigent, the West goes to war) is the worst possible outcome.
I think the Hezbollah attack and hostage taking was a direct provocation, aimed at soliciting this type of response from Israel. They had already seen what had happened to Hamas, so what was the purpose of the raid?