Understanding the 169.254.x.x Address:

An IPv4 address in the range of 169.254.x.x is an Automatic Private IP Addressing (APIPA) address, assigned when a DHCP server is unavailable.

DHCP Server Offline:

APIPA Assignment: When a device cannot obtain an IP address from a DHCP server, it assigns itself an APIPA address to enable local network communication. This allows communication with other devices on the same local subnet but not with external networks.

Resolution: Ensure the DHCP server is operational. Check for connectivity issues between the virtual machine and the DHCP server, and verify the DHCP server settings.

Comparison with Other Options:

The subnet mask is incorrect: The subnet mask 255.255.0.0 is appropriate for the 169.254.x.x range and does not prevent external access by itself.

The IP address is an RFC1918 private address: RFC1918 addresses are private IP ranges (10.x.x.x, 172.16.x.x-172.31.x.x, 192.168.x.x) but 169.254.x.x is not one of them.

The DNS server is unreachable: While this could affect name resolution, it would not prevent the assignment of a non-APIPA address or local network communication.

Troubleshooting Steps:

Verify the DHCP server’s status and connectivity.

Restart the DHCP service if necessary.

Renew the IP lease on the virtual machine using commands such as ipconfig /renew (Windows) or dhclient (Linux).