Which is the right verb to use? Is smelling as a verb strictly connected with air or what fish do is also called smelling?
I ruled out “detect” as it sounds too formal, or is it?
Smell not taste is the correct verb because they can sense blood with their nostrils:
A shark’s primary sense is a keen sense of smell. It can detect one drop of blood in a million drops of water (25 gallons or 100 liters) and can smell blood 0.25 mile (0.4 km) away. Its paired nostrils are on the underside of its snout. Water continually flows through the nostrils, giving the shark olfactory information.
Unlike humans, shark nostrils have nothing to do with breathing – they are not even connected to the mouth.