It had every reason to. The Prophets destroyed nearly three thousand ships. That's every reason for massive retaliation alone. Not to mention as things stood with the Prophets, the Dominion couldn't use the wormhole, but the Federation could. So why would they even think of allowing their enemies even a POSSIBLE tactical advantage like that? Sure, they have forces in the Alpha Quadrant but they're quite self-sufficent as proven in the early season 7 arc when Dukat collapsed the wormhole. They didn't just fold up and die, they kept on going. It stands to reason the Dominion is expanding in the Gamma Quadrant at a steady pace, so too would the Alpha Quadrant Dominion and eventually they'd link up. And if the Alpha Quadrant Dominion loses the war? Well then they have at least fifty years to prepare for a powerful and hostile power. As it stands NOT collapsing it was a worst case scenario for them as they lost anyways and Federation can attack them anytime they want.