C

Two-way SSL (Mutual TLS) is a widely accepted security mechanism for securing API integrations with external systems, especially when integrating with Microsoft Azure API Gateway or other cloud services.

Mutual authentication ensures that both Salesforce and the external API Gateway verify each other’s identities before allowing data exchange.
CA-signed certificates provide additional security by ensuring that only authorized entities communicate with the API Gateway.

Why NOT D?

OAuth is great for authentication and token-based access but does not provide the same level of security as mutual TLS (mTLS) for API-to-API communications.
OAuth would be more relevant for user-level authentication, while mTLS is better for securing system-level API calls.

Also, The way the question is formulate is ambiguous but based on "an integration with an external Microsoft Azure API Gateway" it reads this is for outbound flows - SF to API GW in which case Connected App is not applicable.

D is correct.
The OAuth protocol is a standard way to authorize access to web resources. By configuring a connected app with an authorization endpoint of the API gateway, Salesforce can obtain an access token from the API gateway and use it to invoke the external API securely. This avoids the need to manage certificates or user credentials for authentication

The best integration security mechanism for securing an integration with an external Microsoft Azure API Gateway is:
D. Configure a connected app with an authorization endpoint of the API gateway and configure OAuth settings.

OAuth is the industry-standard protocol for securing API access. Configuring a Connected App in Salesforce allows you to manage OAuth 2.0 flows, ensuring secure authorization between Salesforce and the Azure API Gateway.
This method supports modern security standards, ensures token-based authentication, and aligns well with both Salesforce and Microsoft Azure's capabilities.