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Warning: spoilers ahead for the tenth episode of Gotham Season 3, "Things That Go Boom."
Season 4 of Gotham has been building the conflict between Penguin and Sofia Falcone. The season started off with Penguin on top thanks to his licensing of criminal activity, but things changed after Jim went to ask the Falcone family for help. Sofia Falcone returned to Gotham and seemingly struck up a friendship with Penguin. At the same time, she was working on reestablishing herself as a dominant force in Gotham, and it was only a matter of time before she made her move on Penguin. He forced her hand in "Things That Go Boom" after he confronted her with young Martin's accusation that he saw Sofia kissing Jim. The result was a back-and-forth between the two that ended with a major twist: Penguin killed Martin as a show of force.
That is, it looked like Penguin killed young Martin. The orphan boy was present in a standoff between the forces of Penguin and Sofia, and it seemed that Sofia gained an edge on Penguin when she used his affection for Martin as leverage against him. He seemed to give in for her demands in exchange for Martin's safety, then sent him to a car to wait. Then came the first stage of the big twist: Penguin pulled out a detonator and blew the car to smithereens, presumably with Martin still inside. It wasn't until the final minutes of the episode that we learned Penguin had managed to trick Sofia and her team into believing that Martin was in the car when it exploded. Martin is alive and well, although being sent away to safety.
All things considered, it's not hard to understand why Sofia was tricked into believing Martin was dead. For as much as Penguin had clearly grown to care about the boy, Penguin never look as truly unhinged as he did after blowing up the car and declaring that he would not be beaten by Sofia. She also cared about the boy to a certain extent, which means that the explosion seriously shook her up. Sofia Falcone now has every reason to believe that Penguin will cross any line. As for Penguin, he has revenge on his mind due to Sofia's betrayal of him, endangering of Martin, and aligning herself with even more of his enemies. Both sides will want blood from the other, and that does not bode well for the civilians of Gotham in the rest of Season 4.
A lot of collateral damage could be on the way for everybody in Gotham. Sofia has joined forces with Barbara, Tabitha, and Selina, and those four ladies make for a formidable force with a lot of connections in the underworld. Penguin has a lot of power among the criminal class as well, and he even announced his intention to unleash a crime wave on Gotham like never before. Jim is no longer able to talk either Penguin or Sofia down for very long, and things are likely to explode sooner rather than later. It should probably be super entertaining for fans, although not too much fun for the characters. Who knows? Maybe the conflict will finally motivate Bruce to move away from his drunken playboy persona and hit the streets once again as proto-Batman.