Using a inductive sensor underwater
If the gear is rotating very quickly then it is possible that the sensor will not respond fast enough, those sensors are optimised for stability of detection rather than speed so you may have to test it first but it should be able to work underwater and will likely be just fine.

I would recommend a hall sensor though, that is what is typically used for this application. You can either mount a magnet on the gear or use a slotted or vane type sensor which can be used in a similar way to a photo-interrupter (but would be resistant to stuff that might build up and block light).