I doubt that has much to do with "religion"; they simply don't think a Linux version of Office will bring in enough revenue to be worth the development and support costs... and I probably wouldn't disagree with that assessment.

Linux has large (majority?) market share in the server and IoT markets, but a very tiny market share when it comes to desktop.

Yes, but such applications like Office would make it a lot easier for more people to consider Linux as a viable alternative OS.

Office 365 is supposed to be the cross-platform, run-anywhere, version of Office.

I think that's a pure business decision, they have Office for Android and iOS. Office for Linux might not make that much sense given the low market share on client - but Office 365 has most as WebApps anyway also.

If Linux users don't have any issues putting their documents on Google's servers, they can do the same with Office 365.

You can run the web app in your browser. It's no different than what Google does with ChromeOS. A fully capable web app. I haven't used it in a while, but on the feature front the only place it seemed to lag was collaboration, but I think even that is now on par with Google.

As soon as Linux gets up to 5% market share (currently 1% tops), you might see a Linux version.

In the browser, and it works really well.