This is one of the annoying things about the YouTube embed script. The script requires that you use the schema-less URL. Otherwise, it won't work on the web. However, as you have observed, Chrome doesn't know how to handle it correctly for local files. Firefox manages to get it right (if "right" is the correct way to describe it).
The way you can preview the embedded YouTube video locally is to run a simple web server on the folder. You can do that in Python using:
python3 -m http.server
or in Ruby using:
ruby -run -e httpd . -p 8000
Unfortunately, I don't know of another way to make it work without YouTube changing their embed script.
We do, however, need to document this. I've filed an issue to ensure this information gets added.