Microsoft has confirmed that the Windows 11 KB5066835 update is causing several issues, including a bug that blocks localhost connections and problems with the File Explorer preview pane.
I use localhost all the time to debug my React apps, and after I installed the update, I found that I can no longer connect to 127.0.0.1.
Windows 11 KB5066835 is a mandatory security update for Windows 11 versions 24H2 and 25H2, and it installs automatically.
Author's summary: Windows 11 update causes localhost issues.