{{ }} escapes the output, while {!! !!} outputs unescaped.
When the option label contains line breaks,somehow, these could be escaped to <br> (I guess).
It would be better though to keep using {{ }} and prevent the unnecessary white space in the first place (during label save on admin, maybe trim()?).
Have you checked the line endings of all involved files? Are UNIX line endings used?
Also from the screenshot I see that you inspect the actual (parsed) DOM, not the source HTML (string).
Inspect the raw HTML source (Ctrl + u) for strange characters.