How can I display an external image file using an image component?

add a custom loader to your Image:

<Image
            loader={() => imageUrl}
            src={IMG_API}
            alt={name || t('text-card-thumbnail')}
            width={178}
            height={178}
            className="object-cover rounded-full"
 />

and for cache the image and better performance add your server domain in your next.config.js:

module.exports = {
  reactStrictMode: true,
  images: {
    domains: ['localhost:5000'],
  },
}

and then you can remove loader from Image