Is this 'Windows.net' for email sign-in spyware or even malware?

If you have an Outlook, hotmail, MS Exchange or other Microsoft email account or MS Office product on your iPhone this is a new security feature of Microsoft products. You need to log in to Microsoft’s SSO (Single Sign-On) feature hosted on Windows.net, where you will be offered the option of switching to Passkey login rather than password for improved security.

Delete and re-add your Exchange/Outlook account to your Apple device. Fixed it for me.