What does 'hold water' mean?

[Ilshat]

English Language Proficiency Tests, Advanced Level

ESL/EFL Test #542 "English Slang Idioms (142)", question 4

With a heavy heart, Peter summoned his old friend Jack. Peter recently discovered an embezzlement issue occurring in his company and he immediately knew who the culpable individual would turn out to be. Jack arrived and attempted to provide an explanation for the embezzlement. However, Peter knew that Jack was lying. He said to Jack sadly, "Your explanation doesn't hold .......... There are too many holes in your story and I am going to have to call the police."

(a) ideas
(b) water
(c) gas
(d) scrutiny

English Language Proficiency Tests, Advanced Level

ESL/EFL Test #542 "English Slang Idioms (142)", answer 4

With a heavy heart, Peter summoned his old friend Jack. Peter recently discovered an embezzlement issue occurring in his company and he immediately knew who the culpable individual would turn out to be. Jack arrived and attempted to provide an explanation for the embezzlement. However, Peter knew that Jack was lying. He said to Jack sadly, "Your explanation doesn't hold water. There are too many holes in your story and I am going to have to call the police."

Correct answer: (b) water
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I can hardly be sure that I'm right. Can I choose the word ideas in this case? Please explain it to me. Thanks a lot, my teacher, in advance.

[Mister Micawber]

The idiom is 'hold water'. No other answer collocates here.
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Native English teacher at Mister Micawber's