He lifts his head when Watson calls him an idiot, as there's maybe a hint of unjustified worry in Holmes's statements, but there certainly hasn't been anything idiotic. And he doesn't take kindly to being called an idiot; how that is supposed to convince him that Watson wants to stay with him his beyond him.

"It isn't a matter of libido; it's a matter of logic. She would be a far better partner to you than I can be. She can give you the kind of life you were likely going to find if I hadn't... intervened." He sighs again, a puff of frustrated air, and covers his hands with his eyes. "I didn't realize how... how in the way I am until I saw the two of you holding hands."