You are correct. The reaction of iron with water and oxygen to form iron oxide (rust) demonstrates a chemical change. In this process, the iron undergoes a chemical transformation, resulting in a new substance (iron oxide) with different properties.
The other examples you provided involve physical changes:
- Dry ice vaporizing is a physical change (sublimation from solid to gas).
- Mixing sugar and water is also a physical change; the sugar dissolves, but no new substance is formed.
- Steam condensing on a mirror is a physical change as it involves the transition of water vapor to liquid water.
So, the correct answer is indeed the reaction of iron with water and oxygen to form iron oxide.