I just tried it and it worked okay for me. The hyperlink I created in Word was to a jpg on my own computer and it opened it fine using my default photo viewer Irfanview. Maybe it is a bug with the photos app you have? Or is the jpg location not on your computer? Maybe you are linking to an online jpg?
Try installing or using another photo viewer as your default to see if that fixes it. Irfanview is free and highly rated by those who test these things (and it works for me) but there are others as well.
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