Ironically Apple wasn't even planning on offering apps, they thought web apps would be enough. Until Cydia came up and showed users how great native apps can be. And now it's their greatest money maker.
Developers at WWDC 2007 hated Jobs' "sweet solution" of web apps and wanted to be able to write native apps. Jailbreakers had started probing Apple's apps almost immediately and figuring out how to create native apps, certainly before Cydia. I imagine dynamic aspects of Objective-C (and similarities between the iOS and macOS environments) may have facilitated such introspection and experimentation. Presumably they were able to generate mach-o ARM executables as well somehow before Xcode supported it.
Fast forward a year to 2008 and Apple delivered something that was more than just a dev kit or an installer - an App Store that worked with the existing iTunes Store payment systems. It also happened to be a rather walled garden.
The Cydia Store opened in 2009 and shut down in 2018.
iOS web apps weren't a completely terrible idea - Apple added things like touchscreen support as well as native widgets. Even today they have some advantages, including sidestepping Apple's walled garden. Though with the success of said garden, Apple has less of an incentive to enable web apps to compete with it.
I can't speak for Apple's fans, but iirc some of Apple's main user experience reasons were things like better power efficiency (vs. battery-draining PWAs), better protection from malicious software and user error (e.g. apps can have their keys revoked, users can't mess with drivers or OS files, etc.), and the ability to enforce app privacy requirements.