Nginx Reverse Proxy not redirecting?

Update

I think it narrows down to this:

For some reason the host name matters to Nginx when it's trying to figure out whether to proxy the request. If the host name is set to git.example.com the request does not seem to go through, but if it's set to 203.0.113.2 then it goes through. Why does the host name matter?

Filed an issue with Nginx here

Original Question

When I type in the IP address of the reverse proxy directly into my browser bar, it does perform the redirect.

In this case I'll enter 203.0.113.2 and the redirect to 203.0.113.1 is performed.

When using a URL that is resolved via the /etc/hosts entry 203.0.113.2 git.example.com the "Welcome to Ngnix page" is shown instead of the page that would result from the redirect.

IIUC the browser will first resolve the IP address 203.0.113.2 per the URL entry git.example.com, and so both should result in the proxy configuration being invoked, but that is not what happens.

This is the configuration:

server {
    listen 80;
    server_name git.example.com;

    proxy_set_header X-Real-IP  $remote_addr; # pass on real client IP

    location / {
        proxy_pass http://203.0.113.1:3000;
    }
}

One interesting thing is that I can navigate to for example:

http://203.0.113.2/issues

If I then change 203.0.113.2 with git.example.com I get Nginxs "404 not found" page.