Can iOS apps read the location metadata when allowing access to Photos? I am just wondering if by allowing access to Photos, the application has access to read the EXIF metadata (including where the photo was taken and stuff like that).

Is that possible?
Yes, the app will have access to the full image data including the EXIF metadata that could contain for example GPS location amongst other things.

On the contrary if you're using a web app and uploading photos to it, the EXIF metadata will automatically be stripped by Safari before giving it to the web app.