Which of the following options will mitigate the threat?

Explanations:

Using an S3 VPC endpoint will ensure that traffic to S3 does not go through the public internet, thus mitigating the risk of data exfiltration. By whitelisting only certain S3 buckets, it limits the exposure of sensitive data, ensuring that only authorized buckets are accessible from Server X.

Blocking outbound access to public S3 endpoints on the proxy server will prevent any unauthorized uploads to S3 buckets controlled by Account 2. This action mitigates the risk of sensitive data being exfiltrated through S3 since the malicious actor would be unable to send data to their S3 bucket.

Configuring Network ACLs on Server X to deny access to S3 endpoints would block all access to S3, including legitimate uploads. This would disrupt necessary functionality of the application, as it needs to upload encrypted files to a specific S3 bucket, making it an impractical solution.

Modifying the S3 bucket policy to allow access only from the public IP addresses of the application server could work; however, if the application server is compromised, the attacker may still exploit this access. It does not sufficiently prevent unauthorized access by a malicious actor who might have gained control over Server X.

Removing the IAM instance role and using API access keys stored in a configuration file poses a greater risk. If the configuration file is compromised, the keys could be exposed, and managing the rotation of these keys can lead to security gaps. The IAM role is a more secure way to manage permissions dynamically.