Italian planners recognized the risk of war with Britain

Would a competent Italian admiral understand that attempts to control the Mediterranean risked war with Britain?

Yes; Italian leaders recognized the danger but lacked the budget to prepare for the full British threat, so they planned for narrower cases and hoped Britain stayed out.

Italian planners did not need to be ignorant of British interests to prefer a war that excluded Britain. They understood that an attempt to dominate the Mediterranean could bring the Royal Navy into the conflict. The fleet nevertheless lacked the budget to prepare equally for every possible opponent and theater. Planning therefore concentrated on the forces Italy could afford while diplomacy and hope carried the risk that Britain would intervene.