Thanks for the quick reply.
I did what you said and deactivated all plugins 1 by 1 and it turned out that WooCommerce caused the “enter your new password form” not to appear.
So I went through the settings in WooCommerce and noticed that on
[Settings > Advanced > Page Setup] my login page was set to be my “My account page” so I just changed it and set the actual “My Account” page to be the “My account page”.
It’ working perfectly now! Thank you!!
This is how its supposed to look like to be working in case anyone else is facing the same issue: https://i.imgur.com/2aPXgpm.png
