Microsoft Entra ID Vulnerability Exploits Hybrid Cloud Privilege Escalation

An alarming new vulnerability has come to light in Microsoft’s Entra ID, exposing hybrid cloud environments to the risk of privilege escalation attacks that could ultimately hand malicious actors the coveted Global Administrator privileges. This revelation, credited to the security research team at Datadog, has sent ripples through the cybersecurity community, primarily because of its novel exploitation of first-party applications and the persistent, challenging-to-monitor risk it introduces for organizations utilizing Microsoft’s hybrid identity infrastructure.

Inside the Entra ID Vulnerability​

At the heart of this vulnerability is a sophisticated privilege escalation path that abuses the trusted architecture of Microsoft’s built-in Office 365 Exchange Online application, specifically its Service Principal (SP) with Client ID: 00000002-0000-0ff1-ce00-000000000000. Attackers leveraging this methodology can maneuver from being a moderately privileged administrative user to the apex of Microsoft 365 administration: the Global Administrator.
The attack revolves around the assignment of certain powerful roles—most notably, the Cloud Application Administrator role, Application Administrator role, or accounts with the Application.ReadWrite.All permission. According to Datadog’s technical analysis, these privileged users can exploit the powerful permissions granted to the Office 365 Exchange Online application, especially within hybrid environments where on-premises Active Directory is synchronized with Entra ID. The vulnerability affects users with the onPremisesImmutableId property set, a common identifier used in hybrid deployments to federate user identities.

Exploitation Details and Threat Vector​

The escalation involves a series of coordinated steps driven via Microsoft Graph API:

• Initial Compromise: Attackers obtain access to a Service Principal (SP) account with either the Cloud Application Administrator, Application Administrator, or Application.ReadWrite.All permission. In real-world environments, these permissions are often granted generously to automate integrations or third-party applications, increasing attack surface risks.
• Access Token Acquisition: Using the OAuth 2.0 client credentials grant flow, the attacker authenticates to the tenant, acquiring an access token with sufficient scope ([url="https://graph.microsoft.com/.default%5B/url%5D%5B/ICODE"]https://graph.microsoft.com/.default[/url][/ICODE[/url]). [*][B]Credential Insertion[/B]: Using the Graph API, the attacker injects malicious credentials into the highly privileged Office 365 Exchange Online Service Principal, granting themselves persistent, stealthy access to core Microsoft 365 services. [*][B]Domain Tampering[/B]: Leveraging permissions such as [ICODE]Domain.ReadWrite.All and Group.ReadWrite.All, the attacker adds a new federated domain via the /v1.0/domains endpoint.
• SAML Federation Control: They set custom federation settings using /v1.0/domains/{domain}/federationConfiguration, ultimately allowing the forging of SAML assertions for any hybrid user within the environment.
• Global Admin Token Forgery: With control over SAML federation, attackers can generate fake authentication tokens that are fully accepted as valid by Entra ID, granting Global Administrator privileges. This also enables bypass of multi-factor authentication (MFA), especially when configurations like federatedIdpMfaBehavior are set to accept the MFA status issued by the federated identity provider.

This sequence of actions is not theoretical. Publicly available tools, such as AADInternals, make it feasible for even moderately skilled attackers to operationalize the exploit. For instance, the command Open-AADIntOffice365Portal -ImmutableId can be combined with forged certificates to open privileged sessions into the Microsoft 365 tenant, essentially opening the backdoor to any synchronized hybrid user.

Microsoft’s Response and Industry Reaction​

After Datadog responsibly disclosed the issue to the Microsoft Security Response Center (MSRC) on January 14, Microsoft promptly acknowledged receipt and verified the technical details by March 20. However, a sharp divide between security researchers and Microsoft soon emerged. By May 14, MSRC concluded that this chain of actions was not a software flaw per se, but rather an exploit of allowed configurations and existing documented risks for roles like Application Administrator.
According to Microsoft, the vulnerability "represents misconfiguration, not a security bypass." They argue that granting such broad permissions to Service Principals inherently carries these risks, and their documentation had always noted the privilege and access implications of these roles.
Nevertheless, security researchers and many enterprise defenders view this as a dangerous precedent: one where privilege escalation to the highest admin level can be accomplished without actively exploiting a software bug, simply by chaining together legitimate permissions in an unexpected way. The fact that these roles are often seen as low-risk by operational teams only heightens the danger.

Hybrid Environments: The Perfect Storm​

This vulnerability is not universally exploitable—its most dangerous impact is observed in hybrid identity environments. These are organizations that synchronize on-premises Active Directory users with Microsoft Entra ID for single sign-on, identity federation, and administrative consistency.
The key pivot here is the onPremisesImmutableId property. This identifier is used to map user objects between on-premises AD and Entra ID, streamlining authentication and administrative workflows. However, its presence also means that domain federation attacks (especially those involving SAML token forging) can have maximal impact, allowing attackers to masquerade as any hybrid identity—including those assigned the highest administrative privileges.
Attackers can even circumvent multi-factor authentication in configurations where federatedIdpMfaBehavior is set to accept if the MFA is done by the federated identity provider. This is commonly the case in large organizations seeking to streamline user experience across cloud and on-premises resources.

The Technical Proof: A Walkthrough​

As documented by Datadog, and independently replicated by other security researchers, the privilege escalation can be executed by chaining together a set of API calls and configurations with the right permissions:

• Obtain Client Access:
• Use the /oauth2/v2.0/token endpoint with the compromised Service Principal’s client credentials.
• Credential Tampering:
• Insert a backdoor secret or certificate into the Office 365 Exchange Online SP via Graph API, ensuring persistent, covert access.
• Federated Domain Attack:
• POST a new federated domain under the control of the attacker.
• Configure SAML federation properties to point to the attacker’s identity provider.
• Token Forgery and Access:
• Forge SAML tokens for any hybrid user, including those assigned Global Admin roles.

This exploit chain demonstrates how "unintended" privilege escalation can be achieved through pure configuration—a scenario Microsoft explicitly warns about in its documentation, but one that many organizations still misunderstand and under-protect.

Critical Analysis: Why This Vulnerability Is a Game-Changer​

Strengths and Risks​

Notable Strengths​

• Transparency of Discovery: The responsible disclosure by Datadog, accompanied by technical details and proof-of-concept tooling, empowers defenders to assess their risk and defend accordingly.
• No Zero-Day Required: No unpatched code vulnerability is at play here; the exploit operates within the bounds of the existing Microsoft Entra ID permissions and APIs, demonstrating the critical importance of least privilege architecture.
• Existing Logging and Admin Controls: Defenders can, with the right monitoring, detect suspicious credential insertions and domain configuration changes—if they know what to look for and have the right audit policies enabled.

Notable Risks​

• Widespread Impact in Hybrid Installations: Since a large swath of enterprise organizations run hybrid identity environments, a substantial attack surface remains exposed—particularly those who have not revisited privileged app and domain federation configurations recently.
• Subtlety and Stealth: The attack can be carried out without triggering many standard alerting systems; actions such as credential insertions and domain registration are legitimate operations that may not be investigated unless specifically monitored for.
• MFA Bypass in Common Configurations: Relying on federated identity provider MFA can be catastrophic if the attacker controls the SAML federation, enabling seamless bypasses of one of the mainstays of cloud security.
• Persistent, Difficult-to-Eradicate Access: Once the attacker has injected their credentials into a first-party application’s Service Principal, rooting them out can be especially challenging and time-consuming, particularly if proper app instance property locking is not in place.

Cross-Referenced Accounts and Trusted Sources​

The described chain of attack closely matches not only Datadog’s published findings but also aligns with incidents and risk descriptions indexed in major infosec advisories and forum discussions. While the precise chain (Service Principal with admin application rights → SAML federation manipulation → hybrid identity takeover) is newly public, the broader attack patterns have long been known as high risk in Azure, Microsoft 365, and Entra ID environments. Best practice documents have for years advocated strict segmentation between on-premises and cloud administrators, and regular re-auditing of federation and app permissions. The novelty here is the ability for an attacker to chain together application administration with federation manipulation to ultimately bypass even robust-seeming security controls.

Defensive Measures: Protecting Against the Threat​

Security teams are under pressure to quickly evaluate their exposure and take concrete mitigation steps. Microsoft’s official stance is that best-practice configuration alone should prevent this attack—but as in so many high-profile breaches, “should” is not enough.

Monitoring Recommendations​

Organizations should:

• Monitor for Service Principal Credential Changes: Audit logs should be configured to alert on "Add service principal credentials" and "Update application – Certificates and secrets management" events.
• Domain-Related Event Tracking: Watch for suspicious domain lifecycle events such as "Add unverified domain," "Verify domain," and "Set federation settings on domain."
• Review Admin Role Assignments: Revisit the assignment of Cloud Application Administrator, Application Administrator, and any permissions involving Application.ReadWrite.All and Domain.ReadWrite.All.
• Monitor SAML/Federation Configuration Changes: Any adjustment to federation settings for domains should be tightly controlled and frequently audited, as these are highly sensitive operations.

Microsoft’s Official Guidance​

Microsoft has provided specific configuration recommendations for organizations at risk:

• Cloud-Only Admins: Enforce that Global Administrator accounts are cloud-originated only and have no associated on-premises identity (no onPremisesImmutableId property).
• App Instance Property Lock: Enable the lock setting for application instances—this is enabled by default for new applications as of March 2024, but must be manually set for older application instances to prevent unwanted credential additions.
• Restrict High Privilege App Roles: Reduce the assignment of Cloud Application Administrator and Application Administrator roles. Avoid granting Application.ReadWrite.All and Domain.ReadWrite.All permissions except for tightly controlled break-glass scenarios.
• Federation Hardening: Limit the number of federated domains, and regularly validate federation configuration using independent checks.

Additional Community Advice​

Legacy guidance, often shared in best practice communities and government cybersecurity advisories, reiterates the importance of segmenting administration duties, limiting federation relationships, enforcing two-factor authentication, and maintaining comprehensive logs for all privileged actions. These measures remain more relevant than ever as so-called configuration-based exploits become increasingly sophisticated.

Outlook: Lessons for the Hybrid Cloud Security Era​

This latest Entra ID episode highlights several critical trends in enterprise security:

• Configuration Is Code: As cloud environments become more API-driven, configuration mistakes or abuses are as dangerous as code vulnerabilities. Security teams must treat privileged roles and application permissions with the same scrutiny as vulnerabilities in software.
• Hybrid Complexity = Hybrid Risk: Hybrid environments, while offering flexibility and unified identity, dramatically increase attack complexity and potential blast radius. Persistent ties between on-premises AD and cloud need constant requalification and review.
• Shared Responsibility Gone Awry: Cloud providers may position such exploits as customer misconfiguration, but in reality, the lines between "secure by default" and "dangerous by design" are blurrier than ever. Enterprise defenders can no longer afford to ignore the implications of assigned Microsoft 365 permissions—even those previously assumed to be low risk.

Conclusion: A Call for Continuous Vigilance​

Organizations leveraging Microsoft 365, Entra ID, and hybrid identity infrastructures must take this latest vulnerability as a direct challenge to their current security posture. Auditing, configuration hardening, and continuous monitoring are no longer optional—they are fundamental requirements for operating safely in the modern enterprise cloud.
Security teams should move quickly: examine every Service Principal with privileged roles, double-check all federation setups, and ensure that legacy applications and admin roles have not been left with excessive rights. Lock down what you can, monitor what you must, and consider every legitimate API call as a potential avenue for attack if left unchecked.
The era of "just enabling SSO and federation" is now a relic; today, only a deeply proactive and defensive configuration stance can hope to protect against attackers as creative—and well-resourced—as those who discovered and could exploit this latest Entra ID flaw. As hybrid cloud becomes the norm, these lessons from the front lines of identity and privilege escalation must not go unheeded.

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Source: Cyber Press Microsoft Entra ID Vulnerability Enables Privilege Escalation to Global Administrator