Microsoft indeed has issues supporting a 17 years old standard.
I opened a support ticket, this is the answer:
Based on our investigation, i could notice that the Redirect URls with
IDN domain and Punycode is not supported as of now
We have determined that we have ran into a product limitation and have
no work around at this time.
I encourage you to provide feedback to the Azure Product Groups for
the resources you are using in your environment. You can do this
through the Azure Feedback Forum. This forum allows you to provide
suggestions for new features, ideas for improvements on current
features, as well as general feedback, and then receive a response
from the product group. It’s great to vote for ideas that you’d like
to see implemented or come up with your own!
Further,i would request you to write a feedback forum using the
following link
https://feedback.azure.com/forums/169401-azure-active-directory/suggestions/38663206-support-for-idn-domain-names