unable to lazy load images

I am currently doing local web dev using CF workers. I am generating an html using ES6 string interpolation like this
export const header = () => {
    return /*html*/ `
<div class="navbar-start gap-2">

The problem is that when I serve my html, any image (irrespective of where it is hosted) with the property loading="lazy" is simply not being served. if I remove the loading=lazy, it works fine.

When it doesn't works, the browser's network tab doesn't shows the image either.
Is this a know issue?
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