Candles light underwater, but only in a 1x1 (width length) space of water.
How to reproduce:
Dig a hole two blocks down (1x1)
Fill both blocks with water (do not have to be source blocks)
Place any number of candles inside
Light the candles
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It shouldn't light in water.
A candle will only be unable to be lit if it is in water. You created an air bubble there. The candle can still be lit there.
See MC-203999