This paper establishes a fluid-structure interaction model for the underwater explosion damage to a typical cylindrical shell structure with high-pressure gas encapsulated explosives, using the Arbitrary Lagrangian-Eulerian (ALE) method. Taking a single-layer stiffened cylindrical shell structure as the target, it analyzes the bubble morphology after the high-pressure gas encapsulation, as well as the resulting plastic deformation and displacement deflection of the structure, comparing the results with those of single explosives. The damage mechanisms of the underwater explosion with high-pressure gas encapsulated explosives on the structure are obtained. The results show that the presence of high-pressure gas effectively increases the bubble period and maximum radius, with increases of 11.7% and 13.36%, respectively. For the cylindrical shell structure, the high-pressure gas encapsulated explosives cause a larger area of plastic deformation, and the displacement deflection is increased by approximately 53%.