The market for a compact phone was there and I don’t believe it disappeared — I believe it shifted to larger phones in response to Apple’s shift to offering larger phones.
This is the bit I am not sure about, as I believe that Apple just had to follow global smartphone market trends (read Android phones), rather than setting a trend themselves. The current Android/iOS market split globally is 70/28%, respectively, so Apple have no choice but to keep an eye on it.
My uninformed guess is that making bigger phones is less technologically difficult and probably also less expensive, which allowed Android phone makers of all sizes to flood the smartphone market with 6”+ devices, all at a very reasonable price, pleasing lots of customers.
So could Apple keep or bring a new small iPhone to the market? Sure, as they have both the know-how and money. Would they want to, however, considering minis underwhelming success? This is a trickier question for me to answer, so I will be ebthusiastically awaiting Apple’s next move in September.