#2 Michaels could be stalling

Another possibility here could be that Michaels is simply stalling. His return to the ring was at a Saudi Arabian show.
Michaels has earned the nickname of Mr. WrestleMania, thanks to his legendary performances at The Show of Shows throughout his career. What if he wants to have a last hurrah at 'Mania?
Cody Rhodes' uncle is a WWE Hall of Famer. More details HERE.
Styles told Kelley that Michaels said no to his offer, but what if Michaels just isn't ready for a match yet, and wants to wrestle his final match at a WrestleMania?
If this is indeed the case, one can hope that WWE brings back Michaels for a dream match against AJ Styles at WrestleMania 36. After all, a match of this caliber deserves to take place at WrestleMania.
Also read: 5 times Vince McMahon abruptly canceled a Superstar's push
#1 Michaels probably thinks the ship has sailed for this particular match

Back in the early to late 2000s, Shawn Michaels was enjoying a second run in WWE, and was having amazing bouts one after the other.
At the same time, AJ Styles was building a career in Impact Wrestling. Both Superstars were at their absolute best at the time, and a match between the two could have been an instant 5-star classic!
More than a decade later, Michaels is 54 and his body isn't capable of doing what it used to do back in the day.
Maybe Michaels is aware of the fact that a match against Styles will do nothing but irk the fans, as they won't be getting the masterpiece that these two would have presented in the 2000s.