The fuse needs oxygen to burn. If you make the fuse with some ingredient that can provide that oxygen (like rust, which is iron and oxygen), you can make a fuse that doesn’t need to rely on oxygen from the surrounding air to burn, and it can burn underwater.
You also want to make sure that the thing that contains the explosive is waterproof too, such as a plastic tube or paper dipped in wax, so that the explosive material will explode. Water-logged dynamite does not go boom, for example.
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