Connecting SFTPPlus to SharePoint Online over WebDAV is affected by a security policy change done by the Azure team that enforces multi factor authentication for all users.

Important Notice: SFTPPlus MFT WebDAV Authentication to SharePoint Online impacted by Azure security policy changes
We want to inform you of an important change affecting integrations between SFTPPlus WebDAV and SharePoint Online.
For more details on migrating to SharePoint OAuth2, please read our article: Migrating SFTPPlus Transfers from SAML to OAuth2.
The Azure team has changed the default security policy enforcing multi factor authentication (MFA) for all users.
With this change, SAML claims-based authentication for SharePoint Online no longer works. SFTPPlus MFT relies on SAML to authenticate to SharePoint Online.
The changes are rolled out in stages by Microsoft.
Microsoft is pushing for migrating from SAML to OAuth2 authentication method.
Our team is here to support you during this transition. Contact our support team if you need assistance migrating your authentication method.