Azure Local Host Backup

I believe that you can use Veeam agent to do this

• Create a full image backup of the host.
• Restore to the same or different hardware if needed.

Please, considerate 

• Storage Spaces Direct (S2D): If you’re using S2D, restoring the host image won’t automatically restore the storage pool. You’ll need to ensure the disks and cluster metadata are intact.
• Test Restore: Always validate your backup by performing a test restore on a non-production node.

You can also use this KB to guide you:

KB3244: Veeam Support for Azure Stack Hub

Please, let me know if this works 

Yes for the host use the agent to back it up as Jean mentioned.  You already have Veeam for your other backups to restore.

Basically this should work but I’d personally handle this like every other hypervisor upgrade: Reinstall it in case it fails. I’m not sure how Azure handles this when anything “changes” (e.g. in case of a restore) that’s not triggered by the host or Azure itself. This may avoid errors in the future or any “unclean” states.