If I go to %78.com in the browser, that takes me to x.com. Indeed in RFC9110 §3.2.2, percent-encoding is allowed in HTTPS authorities:
reg-name = *( unreserved / pct-encoded / sub-delims )
But, let's just save ourselves the trouble and forbid percent-encoding in domain names. FWIW, wasmtime fails if the host part of an authority has a %.