> A some point, if you do not have any relationship with the UK, go as far as blocking its residents but they still want you to abide by their law
Ofcom appears to agree that geoblocking UK residents would satisfy the requirements of this law. They also however appear to believe the OPs clients are simply lying about actually geoblocking UK residents - and Ofcom appear's to be the quasi-judicial entity which decides (at least as a first step).
I can't imagine OP's response to Ofcom that "we aren't doing that, but we won't explain what we were doing when we created the domain you think we created to do that" was particularly convincing.
> aren't they just declaring war on the entire world?
No, that would only happen if they started attempting to enforce the law by going into "the entire world" by force. Just declaring that some foreign entity broke your laws and owes you money and maybe that you'll arrest them if they come to your country isn't an act of war. Acts of war look like drone striking alleged drug smugglers in some other countries territorial waters without that other countries permission.