Microsoft is a developer company and their oldest division is developer tools. They've made several attempts into the game engine / game engine adjacent space over the years, though rarely saw wins outside of low level DirectX. (XNA will be most remembered as an indie dev play, but a key piece of XNA was its content pipeline and Microsoft tried but didn't succeed that well at trying to replace the mostly mish-mash of custom tools that most AAA studios use for content pipelines for something somewhat more standardized; though of course with the easy retrospect failure of being hobbled by focusing on Xbox first/primarily.) So productionizing id Tech 6 isn't an entirely crazy idea for Microsoft in terms of something that makes cultural sense for them. Game Engines can be an important dev tool; especially in the increasing interest in non-game capital-E Enterprise in game engines for visualization tools (including AR/MR/VR).

But yes, Microsoft seems to have a good working relationship with Unity at this point and probably wants to try to keep a good relationship with Epic, so I don't envy whatever product strategist would have to figure out if that minefield would be worth disturbing.