NGINX and Laravel always returns response code 200

I sincerely hope you can help me as none of the similar topics and provided solutions fixed the situation.

I am running on the same container for simplicity nginx as reverse proxy, vue app fro frontend and laravel backend.

Nginx always returns status code 200, although I tested with a /test route that throws NotFoundException. The returned resp has header status 200 and upon inspection of the Response in the browser indeed 404 not found is displayed.

WHAT I HAVE ALREADY TRIED: Adding to pool php_admin_value[display_errors] = Off In my case it was not located in the default folder within the container but in /usr/local/etc/php/php-fpm.d/www.conf

Adding to nginx.conf error_page 404 /index.php;

No joy, still receiving 200 regardless of actual response.

MORE DETAILS ON THE CONFIGURATION: Dockerfile

FROM php:8.0-fpm

WORKDIR /var/www/html/app

# Install system dependencies and PHP extensions
RUN apt-get update && apt-get install -y nginx libpng-dev libjpeg-dev libfreetype6-dev zip unzip git \
    && docker-php-ext-configure gd --with-freetype --with-jpeg \
    && docker-php-ext-install gd pdo pdo_mysql

# Install Composer globally
RUN curl -sS https://getcomposer.org/installer | php -- --install-dir=/usr/local/bin --filename=composer
RUN curl -sL 'https://deb.nodesource.com/setup_16.x' | bash - \
    && apt-get install -y nodejs

COPY ./api ./api
COPY ./frontend ./frontend
COPY ./nginx /etc/nginx/conf.d
COPY ./fpm /usr/local/etc/php-fpm.d   --->overriding the www.conf to add display_errors line


CMD ["php-fpm"]
EXPOSE 80

docker-compose.yml

version: "3"

services:
  web:
    build: ./
    restart: always
    volumes:
      - ./nginx:/etc/nginx/conf.d
      - ./api:/var/www/html/app/api
      - ./frontend:/var/www/html/app/frontend
#      - ./fpm/www.conf:/usr/local/etc/php-fpm.d  --->mount the custom www.conf for hot-reload

    ports:
      - "80:80"
  #    command: ['./frontend/start.sh']
    networks:
      - app

  mysql:
    image: 'mysql:8.0'
    volumes:
      - 'db_data:/var/lib/mysql'
    ports:
      - "3306:3306"
    environment:
      MYSQL_ROOT_PASSWORD: '${DB_PASSWORD}'
      MYSQL_DATABASE: '${DB_DATABASE}'
      MYSQL_PASSWORD: '${DB_PASSWORD}'
      MYSQL_ALLOW_EMPTY_PASSWORD: 'yes'
    networks:
      - app

  mailhog:
    image: 'mailhog/mailhog:latest'
    ports:
      - 1025:1025
      - 8025:8025
    networks:
      - app
volumes:
  db_data:
    driver: local

networks:
  app:
    driver: bridge

nginx.conf

    upstream frontend {
        server localhost:3000;
    }

    upstream api {
        server localhost:9000;
    }

    server {
        listen 80;
        server_name localhost;

        error_log stderr;
        error_log /var/log/nginx/error.log;

        access_log stdout;
        access_log /var/log/nginx/access.log;

        location / {
#             root /var/www/html/app/frontend/dist;
            proxy_pass http://frontend;
            proxy_set_header Host $host;
            proxy_set_header X-Real-IP $remote_addr;
            proxy_set_header X-Forwarded-For    $proxy_add_x_forwarded_for;
            proxy_set_header X-Forwarded-Proto  $scheme;
            proxy_read_timeout          1m;
            proxy_connect_timeout       1m;
            proxy_redirect off;
        }

        #localhost/storage should serve static files
        location /storage {
            #testing only
            return 200 "document_root: $document_root, request_uri: $request_uri, real_path_root: $realpath_root";
        }

        location /api/v1 {
            error_page 404 /index.php;

            root /var/www/html/app/api/public;
            include fastcgi_params;
            proxy_set_header Host $host;
            proxy_set_header X-Real-IP $remote_addr;
            proxy_set_header X-Forwarded-For $proxy_add_x_forwarded_for;
            proxy_set_header X-Forwarded-Proto $scheme;

            fastcgi_buffers 16 16k;
            fastcgi_buffer_size 32k;
            fastcgi_intercept_errors on;
            fastcgi_pass 127.0.0.1:9000;
            fastcgi_param SCRIPT_FILENAME $document_root/index.php;
            fastcgi_param DOCUMENT_ROOT $realpath_root;
        }

        # Deny .ht* access
        location ~ /\.ht {
                deny all;
        }
    }