I am wiring hot water heater to 2 pole 3 amp breaker.

Hot Water tank has double thermostat. At the top of the water heater are two wires, one black and one red. No white wires as I am normally familiar.

Is there a way to wire without using a junction box? The heater is very close to panel. If not what kind of junction box do I need?

A 240v circuit as you have with the water heater does NOT have, or require, a neutral.
You can use 10/2NM cable and re-mark the white wire as a hot. This is a perfectly typical installation.