Originally Posted by
Son Of Sparda
Friday says to Tony, the vibranium core has a magnetic field, keeping the City together. If Thor/Tony just deactivated the core, Friday states the city would simply fall apart, still leading to a massive deathtoll. An alternative is presented where Thor's power is used to vaporize the entire city AFTER Tony creates a heat seal that prevents Thor's power from escaping the city and destroying the nearby helicarrier, meaning his power doubles back up. The core and engines are not destroyed, as you see them falling intact among the wreckage. So it is in fact Thors power that vaporizes the city.
The atomic reaction thing is simply his power being redirected by the vibranium core as foreshadowed earlier in the movie.