The credentials are stored in Azure AD. Azure AD supports OpenID Connect. The clients use a modern browser using Android/iPhone or Windows Hello.
Is it possible to implement the WebAuthn API with your website. And when a user has no private/public FIDO key stored for your website let the user authenticate with OpenID Connect and their Azure AD credentials? And the next time they would like to use your website they don't have to authenticate with their Azure AD credentials anymore because there is a FIDO key on their device four your website?
Or am I saying something completely stupid and does WebAuthn not work this way?
I hoped to find an example where they did implement such a use case but it is difficult to find something on this topic. I found this topic How does WebAuthn allow dependent web API's to access public key for decrypting credential without having to send the key? but it still doesn't explain if I'm on the right track.
There is no direct relationship between WebAuthn and a federation protocol, like OpenID Connect. They are, however, often used together, but with WebAuthn being used to authenticate the user to the IdP (the OIDC provider).
Federation should not be mixed with local credentials. I would recommend not doing this as it will be very confusing to the user.