no wait i think i figured it out:

The thermite melts into the ice until its about at the center of the blocks, at which point it very quickly superheats a pocket of water. Superheated water will indeed explode upon agitation or contact with a nucleation site, which there are plenty in this situation. Normally the water wouldn't have a chance to superheat without starting to boil but thermite burns so hot and so quickly that all of this can probably happen in half a second or something. The pocket of water will flash to steam and blow apart the ice and thermite (making it look like a fiery explosion in the process).