Using classic Outlook for Windows in business environments
At one time Apple did default to using Basic Auth when connecting to Outlook.com/Hotmail.com, so if you had this account setup for a while it would continue to be setup that way. There isn't anything behind the scenes that they just change, it will require a user to remove and readd the account.
When you are within the Apple Mail app and Adding a New Account, you should select Outlook.com as the email provider. Then login with your username and password.
Thank you David for your support.
Apparently I had previously added my @outlook.pt account in the Apple Mail app through the Microsoft Exchange provider.
Now I’ve removed and readded my account using the Outlook.com email provider, and I don’t get any password prompts anymore.
Thanks again 👍