One of the fatal flaws of the neocon* is their bullying sense of self superiority. They invariable think they can frighten others into doing what they want, even though they know it wouldn't work against them.
I don't know about Bush personally. But many in his circle subscribe to the idea that Iran is made up of dirty Arab Muslims. And therefore they lack the strong character of good white male** Christians like themselves. Thus they always expect the other side to cave when faced with a major threat.
Jay
* And Facist ways of thinking in general
** Both the white and male are somewhat optional now. But the neocon cabal is built up from the old US patriarchy, and the members are overwhelming white males.