It's all up to Iran.
They won't lose face by not responding because they haven't been hit on their own turf. But if they keep upping the ante they run that risk. The ball is in their court. Its exactly how I would have handled it if I were Biden.
But if they escalate, then Biden has to strike IN Iran or lose all credibility.
You can't give people who kill Americans a free pass, or they will see it as a sign of weakness. And they will be right.