Make the naan dough. Combine the warm water with 1 teaspoon sugar and yeast in a bowl. Let sit for 5 minutes or until the mixture is foamy and the yeast is activated.
In the bowl of a stand mixer, add the flour, milk, yogurt, salt, oil, and the yeast mixture. Mix until a rough dough forms and knead until smooth, about 7-8 minutes. Alternatively, knead the dough by hand. The dough will be soft and slightly sticky. Transfer the naan to a clean bowl, cover, and let rise for 1 hour or until doubled in size.
Meanwhile, make the chili oil. Combine the oil with cumin, fennel, peppercorns, star anise, garlic, bay leaf, and ginger in a medium sauce pot. Heat the oil over medium heat until it reaches 350 degrees F. Lower the heat to low and continue to cook the spices until fragrant, about 3-4 minutes. If the oil gets too hot, turn off the flames and let it sit.
Put the chili powder in a large bowl and place a mesh strainer on top. Pour the hot oil through the strainer directly into the bowl with the chili powder. Add the salt and stir to combine. Let cool.
Punch down the naan dough and divide it into 8 equal pieces. Lightly dust a clean work counter with flour and roll out the dough until it's ⅛-inch thick.
Heat a skillet over high heat until it's scorching hot. Place one of the naan on the pan and cover with a lid. Cook for 1 minute or until bubbles form, flip and cook another 1-2 minutes or until browned. Remove from heat and keep warm in clean kitchen towels. Repeat with the remaining dough.
Brush the chili oil on the naan and sprinkle with chopped cilantro and sea salt. Serve warm.