I'm not sure shooting it out between the kidnapped rubber boat crew and the Iranians would have been practical. Since there was no formal hostilities between the Brits and Iranians, the Brits allowed them to approach for a parle. Then the Iranians went into high aggression by surprise.
What is astonishing is the subsequent fecklessness of the UK and Royal Navy. The Iranians and Arabs only understand and respect one thing, raw power. These are not honorable people you're dealing with. They will do anything and everything to hurt you regardless of any mores of civilization. They will take advantage of your humanity and turn it against you. Only when you understand that, will you begin to come to grips on how to fight the fight. You don't try to reform them, you just kick the place over and destroy anything that can be used in the future for agression, then you WALK AWAY. Oh, and you ban any newcomers from that country from entering your country. That means ANYONE. In 10 years you might have to do it again, but the cost is a lot cheaper than what we're doing now.
Within two hours of the kidnapping of the crews, it should have been explained to the Iranian Theocracy that the Brits WILL be released in 6 hours unharmed and uninterrogated, or the Iranian Navy will cease to exist in 7 hours. And that's just for starters.
In the future, ALL approaching Iranian vessels should be considered hostile and fired upon.