I reviewed the manual for "diff" and it says:
For many other programs newline is also a white space character, but diff is a line-oriented program and a newline character always ends a line. Hence the -w or --ignore-all-space option does not ignore newline-related changes; it ignores only other white space changes.
wdiff seems to be recommended from this answer: Ignore newlines with diff
but I can't find the right arguments in the man page of wdiff.