I know the title and story makes it seem at least trans-adjacent, but you can have body dysmorphia without gender dysphoria.
This whole story has been him discovering and embracing the fact that he's the "small cute one" and by this point, that's become a core part of his identity, and more importantly, that's the thing that (in his view, at least, and justifiably so) got him together with Midou.
And for just a moment, that was threatened, and he understandably panicked.
I mean, think of something about yourself that is important to you (anything at all, really). Now imagine being told that in a year, that thing would be gone and you'll never get it back.
It's not really a gender thing. It's a core identity thing. Sometimes the two overlap, but not always.
And yes, puberty blockers will delay the onset of... well, exactly what they say, but wanting to stay small and androgynous isn't the same thing as wanting to go through female puberty either, and he'd eventually have to do one or the other.
/soapbox
