I am trying a scenario as per the diagram where ABC Azure network are peered in a chain & VM-A is trying to communicate with VM-C. "Allow forwarded traffic" is enabled for all peering's. A is not directly peered with C. Will a traffic transit work over B with custom route here or is A-C direct peering the way to go.
A peering is established between two virtual networks. Peerings are not transitive. If you create peerings between:
VirtualNetwork1 & VirtualNetwork2
VirtualNetwork2 & VirtualNetwork3
There is no peering between VirtualNetwork1 and VirtualNetwork3 through VirtualNetwork2. If you want to create a virtual network peering between VirtualNetwork1 and VirtualNetwork3, you have to create a peering between VirtualNetwork1 and VirtualNetwork3.