Literally the only demand made by the dominion was they stop going through the wormhole and making incursions into.their sovereign space. The federation has a neutral zone with the romulans that has lasted like 100 years or more by that point, but if there’s a wormhole it’s somehow their god given right to poke around someone else’s territory? Not even to mention the Cardassian/Romulan pre emptive attack on the Founders homeworld. Prior to that they just sent spies and harrased ships in the gamma quadrant. Seems like a more than reasonable cause for war to me.
The fact that those refugees felt safe near the wormhole indicates that they didn’t regard the territory around it as Dominion territory, indicating that the Dominion didn’t have a legitimate claim to it at the time.
And you don’t think that starting a battle that leads to the destruction of a ship that houses over a thousand people is a bit of an overreaction to a couple of adolescent boys doing a school project? Seriously, there’s just no way to write the Dominion’s actions as reasonable here, even if their grievance was legitimate. The Alpha Quadrant had been peacefully exploring and trading with the Gamma Quadrant for over a year before the Dominion suddenly shows up and murders over a thousand people. That’s a horrible political misstep by the Dominion that was certain to provoke hostilities. They should have sent some Vorta over to the major AQ powers as ambassadors to make their case first.