What should you do if you suspect that a service principal's credentials in Azure Key Vault have been compromised?

Rotating the service principal's credentials is the most appropriate action to take when there is a suspicion of compromise. This process involves changing the credentials used by the service principal, effectively revoking the access that may have been exploited by unauthorized users. By rotating the credentials, you ensure that any potential malicious actors cannot continue to use the compromised credentials to access resources, thereby enhancing the security posture of your Azure environment.

This step is crucial in incident response as it mitigates the risks associated with credential exposure. Not only does it prevent further unauthorized access, but it also allows for ongoing operations to resume securely, as the service principal can be quickly assigned new credentials for continued functioning.

Other options may not provide the necessary immediate action needed to respond to the breach. Monitoring the service principal's activity could provide insights into the threat but does not stop unauthorized access. Deleting the service principal outright could lead to operational disruptions and may not address the immediate threat unless you are certain the service principal is no longer needed. Disabling Azure Key Vault would severely impact any applications relying on it, and would not be a targeted response to the suspected issue with the service principal’s credentials. Thus, credential rotation is the most effective immediate remediation step.