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Just to update, after testing by disabling rule sets one by one it turned out to be ET open/emerging-exploit blocking the activation.
I have twelve different sites all with the same issue and none of them show any alerts from ET open/emerging-exploit making it impossible to find the rule within the set actually blocking the connection.
Anyway I hope this helps anyone with the same issue.

Thanks for your response, no issues with network in windows.
Also this is happening at many different sites and the only way to activate office 365 is to disable IPS.
As soon as its disabled closing and re-opening word or excel activates the license.
I have tried to manually activate with IPS enabled and office apps show an error not being able to activate due to network problems.
I have checked the Intrusion Detection alerts when manually trying to activate and there are no entries to show it being blocked. Its definitely IPS blocking it but I have no way to stop it.

Hi All,

Having an issue since updating to 21.1.8 with IPS blocking users office 365 installations from staying activated.
I have gone through all the alerts in intrusion detection and cant find the rule blocking this to be able to disable it.

Disabling IPS allows office to activate so a rule must be blocking it even though its not showing in the alerts.

Anyone else having this issue or discovered the rule blocking it ?

I reported the same thing on the 18.1.12 update.

I had the same after updating to 18.1.12 and found changing Pattern matcher to Aho-Corasick solved the problem.