Is Lost Mines of Phandelver’s Young Green Dragon too much for a group of level 3 characters?

My group of 8 level 3 players are about to run through the Thundertree Ruins and will probably have a hand at fighting the dragon. My question stems from the fact that a single poison breath attack from the dragon will outright kill all but 1 player assuming they fail their saving throws.

I understand this encounter is supposed to be ridiculously deadly, but I don’t want to be punishing my players for testing the lengths at which they can fight stuff. A fight should be challenging and they should be able to try and run away, but instant obliteration seems a bit much.

All PCs are level 3 (HP in parenthesis):

  • Wood elf moon druid (27)
  • dwarven frenzy barbarian (44)
  • fire genasi archer ranger (37) (pseudodragon companion (12))
  • wood elf assassin rogue (27)
  • human wild magic sorcerer (22)
  • dragonborn fighter (29)
  • human monk (24)
  • human fighter (32)