I suggest a hybrid method.

Do something like the first method except that you begin new transactions only at certain record counts, for example, every 2000 values processed:

record #1; record #2001; record #4001; etc.

You can adjust the number up or down as needed to reduce locking.

Every one in a separate transaction is huge overhead in creating and committing trans.

All in one transaction is huge overhead if it has to rollback after doing a lot of inserts/updates.