So you’re saying that the person standing in ruin at the end of the song thinks of their loved one and sets off a nuclear bomb?

I think the red balloons were just red balloons, mistaken for an enemy attack.

You and I in a little toy shop
Buy a bag of balloons with the money we've got
Set them free at the break of dawn
'Til one by one, they were gone
Back at base, sparks in the software
Flash the message "something's out there"
Floating in the summer sky
99 red balloons go by

99 red balloons
Floating in the summer sky
Panic bells, it's red alert
There's something here from somewhere else
The war machine springs to life
Opens up one eager eye
Focusing it on the sky
The 99 red balloons go by

99 Decision Street
99 ministers meet
To worry, worry, super scurry
Call the troops out in a hurry
This is what we've waited for
This is it boys, this is war
The President is on the line
As 99 red balloons go by

99 knights of the air
Ride super high-tech jet fighters
Everyone's a superhero
Everyone's a Captain Kirk
With orders to identify
To clarify and classify
Scrambling the summer sky
99 red balloons go by

As 99 red balloons go by

99 dreams I have had
In every one, a red balloon
It's all over, and I'm standing pretty
In this dust that was a city
If I could find a souvenir
Just the prove the world was here
And here is a red balloon
I think of you, and let it go

From Wikipedia:

The lyrics of the original German version tell a story: 99 balloons are mistaken for UFOs, causing a military general to send pilots to investigate. Finding nothing but balloons, the pilots put on a large show of firepower. The display of force worries the nations along the borders and the defense ministers on each side encourage conflict to grab power for themselves. In the end, a cataclysmic war results from the otherwise harmless flight of balloons and causes devastation on all sides without a victor, as indicated in the denouement of the song: "99 Jahre Krieg ließen keinen Platz für Sieger," which means "99 years of war left no room for victors." The anti-war song finishes with the singer walking through the devastated ruins of the world and finding a single balloon. The description of what happens in the final line of the piece is the same in German and English: "'Denk' an dich und lass' ihn fliegen," or "Think of you and let it go."[11]