Why interwar aircraft did not rely on diesel engines

Why did interwar navies not use diesel engines for carrier aircraft?

Because aircraft development depended on rapidly increasing horsepower, and diesel engines were not perceived as powerful enough.

Aircraft design in the 1920s and much of the 1930s was a horsepower race. Many later aerodynamic gains had not yet matured, so designers depended heavily on engine power to improve performance. Diesel engines were not seen as delivering enough power for that competition.