To preface this theory, there are a few assumptions needed that have not been confirmed yet by the manga nor Oda. With that in mind it can be written off as a crackpot theory but an interesting idea if true. If that is not your cup of tea then by all means skip this one.
For those still around, let’s spell out the assumptions necessary
Luffy’s Mother/Grandmother – I am going to assume that Luffy’s still undisclosed Mother/Grandmother is of the same race as King from the Beast Pirates. Why this is will be explained later.
King’s race – I am going to assume that King’s race and the perpetual fire that is always around him is part of a racial trait or racial affinity.
Sun race – While not necessary for this theory fully I think it would make more sense this way that King’s race would be one that inhabited what is the sun in One Piece’s world.
With those assumptions out of the way let’s get to the theory. I would like to put forward that Luffy is a half breed between Dragon’s native race, which still is not fully known, and his mother’s if not full, partial Sun race. It could have even come from Garp’s partner, which is also still unknown. Either way it came to be I believe this racial trait is what is causing Luffy’s fire manifestation.
Some would say it is a natural evolution from Gear 2, speeding up the heart, blood, and nutrients, causing steam to be emitted from the body, I can see that to a point, and it’s an absurdist fantasy story so that I can pass.
Moving forward to post time skip, we have the red series of attacks, these cause literal fire to erupt from Luffy’s armament imbued haki. For what we know on Haki here is a link:
As far as we know today in the series, no one has applied an elemental aspect to haki itself. It has been treated completely outside of haki, devils fruit abilities and awakened abilities can have haki applied to them however, specifically paramecias.
Examples being Doflamingo’s string ability and Katakuri’s mochi ability. Those we have precident for and fall in to the paramecia type fruit abilities. Though there has been no precident set where a logia type user could infuse haki into the element they are using.
With that in mind, there is no precident for any elemental affinity or effect to be applied OVER haki. One argument could be made that Luffy is just taking the same principle as gear 2 and applying it in overdrive. Ok, maybe, but that would cause fire internally from the friction, not externally.
Going forward with the arguments above I am going to assume that the fire from Luffy’s red attack series has nothing to do with his devils fruit or haki in general.
There is only one race that has been shown to have some kind of affinity to fire, Kings, and it is also shown that it does not seem to hurt him even though it is on his head constantly. Know what else looks more and more like flowing fire every time it gets evolved? Luffy’s hair in his gear fourth series. Even the steam is starting to resemble more fire like traits than it is steam. In the picture below we can see the color tinting talks about as well as the representation of Luffy’s hair and steam characteristics.
One more addition to this, there have only ever been two characters that have exhibited any distinct tinting to their armament haki. Luffy (red) and Katakuri (blue). All other representation of armament haki applied to the body has been simply black. While that could be explained by the person’s mastery of the two different haki types being in two different areas, armament for Luffy and observation for Katakuri, it does not explain why that has not been the case for anyone else.
With all of the above said, I believe that King and Luffy’s partial race ability is to manifest fire at one level or another on maturity of haki at some point in time. Whether this is simply something that manifests with or without haki I’m not sure, though I don’t think King would be coating himself with haki at all times so I am going to assume that it is something racial that is exhibited naturally after a certain maturity level.
Edit: One last piece I had just thought of for it, it would also make sense that this race was nearly extinct if they posessed abilities or traits that would upset the world order and have been all perged through various means by the world government. Explaining why we never see them and why they would disappear so quickly.
Let me know what you think and have a good one.