Wine was made exclusively with fermentation. The highest alcoholic content available via fermentation is 16-20%. They diluted the wine to make it palatable, not because it was too alcoholic, unless nishtaneh hatevah. There is archaeologial evidence that the ancient Egyptians and other had distillation. It’s possible they had hard liquor, but not known for sure. From Wikipedia:
Early types of distillation were known to the Babylonians in Mesopotamia (in what is now Iraq) from at least the 2nd millennium BC.[2] Archaeological excavations in northwest Pakistan have yielded evidence that the distillation of alcohol was known in the Indian subcontinent since 500 BC,[3] but only became common between 150 BC – 350 AD.[3] Distillation was later known to Greek alchemists from the 1st century AD,[4][5][6] and the later development of large-scale distillation apparatus occurred in response to demands for spirits.[4] According to K. B. Hoffmann the earliest mention of “destillatio per descensum” occurs in the writings of Aetius, a Greek physician from the 5th century.[7] Hypatia of Alexandria is credited with having invented an early distillation apparatus,[8] and the first clear description of early apparatus for distillation is given by Zosimos of Panopolis in the fourth century.[6] Primitive tribes of India used a method of distillation for producing Mahuda liquor. This crude and ancient method is not very effective.[9]
The invention of highly effective “pure distillation” is credited to Arabic and Persian chemists in the Middle East from the 8th century. They produced distillation processes to isolate and purify chemical substances for industrial purposes such as isolating natural esters (perfumes) and producing pure alcohol.[10] The first among them was Jabir ibn Hayyan (Geber), in the 8th century, who is credited with the invention of numerous chemical apparatus and processes that are still in use today. In particular, his alembic was the first still with retorts which could fully purify chemicals, a precursor to the pot still, and its design has served as inspiration for modern micro-scale distillation apparatus such as the Hickman stillhead.[11] The isolation of ethanol (alcohol) as a pure compound through distillation was first achieved by the Arab chemist Al-Kindi (Alkindus).[12] Petroleum was first distilled by the Persian alchemist Muhammad ibn Zakar?ya R?zi (Rhazes) in the 9th century, for producing kerosene,[13] while steam distillation was invented by Avicenna in the early 11th century, for producing essential oils.[14]
As the works of Middle Eastern scribes made their way to India and became a part of Indian alchemy, several texts dedicated to distillation made their way to Indian libraries.[15] Among these was a treatise written by a scholar from Bagdad in 1034 titled Ainu-s-Sana’ah wa’ Auna-s-Sana’ah.[15] Scholar Al-Jawbari travelled to India.[16] By the time of the writing of the Ain-e-Akbari, the process of distillation was well known in India.[17]
Distillation was introduced to medieval Europe through Latin translations of Arabic chemical treatises in the 12th century.[18] In 1500, German alchemist Hieronymus Braunschweig published Liber de arte destillandi (The Book of the Art of Distillation)[19] the first book solely dedicated to the subject of distillation, followed in 1512 by a much expanded version. In 1651, John French published The Art of Distillation the first major English compendium of practice, though it has been claimed[20] that much of it derives from Braunschweig’s work. This includes diagrams with people in them showing the industrial rather than bench scale of the operation.