Yes it can diminish sexual sensitivity, as the glans becomes dry, rough and keratinized.
It's normal and natural to have a foreskin; that's the state of a complete male.
If your foreskin is short, it's possible to stretch it daily and extend it for more natural coverage and maximum sensitivity, plus more comfort without the glans rubbing on clothing.
Simply pull the foreskin out, away from the body, at every opportunity, for about 10-15 minutes per session. It will take months to see an appreciable gain, but you can do it if you persist and make it a habit.
I was mutilated by circumcsion forced on me at birth, and suffered more than the usual loss of sexual sensitivity as a result of the extensive neural and vascular damage to my penis, plus the keratinization.
I finally found out about foreskin restoration, which uses techniques that put tension on the shaft skin, gradually allowing new skin cells to grow and fill in, which extends it into a new foreskin.
While it won't repair the neural and vascular damage that is permanent, it does vastly improve sexual sensitivity and the intensity of orgasms, also.
More than 200,000 guys are restoring their foreskins, to get back some of the sensitivity/function of which we were deprived by the damage and mutilation that is circumcision.
Circumcision is a fraud and a hoax.
A foreskin is not a birth defect; it is a birthright.