Configuring Microsoft 365 & Personal Folders File with iTunes
If you add an Microsoft 365 mailbox to Outlook, it may become the default mail store. iTunes will only sync from the default mail store, so the contacts/calendars from another mail store (such as a Personal Folders File, .PST) will not be recognised.
If necessary, to remedy, make the Personal Folders File the default data file. The Microsoft 365 mailbox can still be the default mail account for sending.
Close iTunes & Outlook and reopen.
This configuration allows iTunes to sync contacts/calendar from the Personal Folders File, while the iPhone/iPad will sync the Microsoft 365 mailbox over the air (OTA).
However, as a general rule, it's a clumsy configuration to sync contacts/calendars via iTunes when there is an Microsoft 365 mailbox available.