I also came upon this issue recently. It not only affects umlaut characters but also accented characters such as á vs. Á
Just noticed this too, and was about to file a new bug report.

It is for all foreign characters. E.g. a search for "æøå" won't match a sentence with "Æøå" (uppercase Æ).

TextEdit.app has it correct:

Using ST3 3059.
I have posted a question here as well:

Hopefully someone has a workaround.

Unfortunately, nothing has changed in 2 years! The bug is still unfixed. :(