The correct option is C. Character vs. character.
There is conflict between the two characters and both are struggling to beat one another. Walter's fantasies are a way to battle his wife's reprimands. In literature there are many examples of this conflict in which prevails a strong antagonism between some characters, for instance: Harry Potter vs. Lord Voldemort.
Option A. is not correct because there's no nature involved in the conflict.
Option B. is not correct because the conflict between the two characters is not related to society.
Option D. is incorrect since there's no self-struggle involved.