AKS Ingress works with IP and DNS label but not with Cloudflare DNS Record

Question

So, I created an AKS cluster with 2 deployments:

1. C# RESTfull API
2. C# YARP API Gateway

both have ClusterIP services. I added nginx ingress controller to my cluster and created an ingress component in namespaces where the pods and services of my deployments are running and it looks like this:

apiVersion: networking.k8s.io/v1
kind: Ingress
metadata:
  name: api-gateway-ingress
  namespace: apps
  annotations:
    nginx.ingress.kubernetes.io/ssl-redirect: "true"
    nginx.ingress.kubernetes.io/use-regex: "true"
    nginx.ingress.kubernetes.io/rewrite-target: /$2
    cert-manager.io/cluster-issuer: letsencrypt-staging
    kubernetes.io/tls-acme: "true"
spec:
  ingressClassName: nginx
  rules:
  - host: myhost.hr 
  - http:
      paths:
      - path: /api(/|$)(.*)
        pathType: Prefix
        backend:
          service:
            name: api-gateway-service
            port:
              number: 3000
      - path: /(/|$)(.*)
        pathType: Prefix
        backend:
          service:
            name: aks-helloworld-two
            port:
              number: 80
  tls:
  - hosts:
    - myhost.hr
    secretName: letsencrypt-staging

I got my IP address and my host in Azure portal "Ingresses" on Kubernetes cluster a even went so far as to configure the DNS label for that IP address-

and this worked if I went to http://{ingressIp}/api/{endpoint} I get the response same as for http://{azureDnsLabel}/api/{endpoint} everything works as expected.

Then the next step was to go to Cloudflare and configure the DNS record that I did creating the CNAME entry that points to my Azure DNS label. Also, I created the Cert manager and ClusterIssuer in my AKS as a part of debugging the issue:

apiVersion: cert-manager.io/v1
kind: ClusterIssuer
metadata:
  name: letsencrypt-staging
  namespace: cert-manager
spec:
  acme:
    email: