This video is a good example of how powerful Lithium batteries can be when they short out.
When you hit the battery, two things will happen
- You damage the sheets of lithium salts, causing the battery to short-circuit internally.
- You make a hole in the battery, causing a sudden depressurization
The short-circuit generates heat, allowing the Li to catch fire. The depressurization causes the (burning) Li to want to get out, generating an airflow, making it fly around. The two things combined are what that explosion is.
If you want an object that holds a lot of energy in a small place, there will be a way to let that energy release aggressively.