Poseidon was so focused on chasing Medusa that he didn't see Dionysus' real power. Dionysus is the god of wine, partying, and getting drunk without control.
While the Sea God was obsessed by his never-ending pursuit, Dionysus was doing very well in the world of humans, where his power and popularity were growing very quickly. Poseidon didn't understand that Dionysus had a power that made most of the gods avoid him.
There was something very powerful about the God of Wine. He could control the most basic wants and fears that people had, even when they lived in a civilized society.
It was a big mistake for Poseidon to flood Dionysus's vineyard because he was feeling upset about not getting any news from Dionysus; he flooded it simply thinking Dionysus would let him go without any consequences. The Sea God would soon realize how wrong he was.
