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Glad to know that issue is resolved by itself.
One of our re:Post fellow explained and summarized things pretty well, so not mentioning the cases here again, which could cause this. Here is that re:Post discussion.
AWS Support too has talked to address such questions here.
I myself have seen this behavior quite sometimes and to best summarize it, service quota granted limit is the max limit of resources that one account can use, however not always that limit is an absolute guarantee, that resources would be available to your account. Regional limit may also play a role or dependent resources quota limit also comes into the picture.
For dedicated resource allocation, Account team, capacity reservation team and service team all together can help that customer/account.
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Have you checked the right region ? The EC2 per instance type quotas are per region.
Yes, I did check the region across Service Quotas and EC2 . And all had the same region.
I tried again just now and the instance started flawlessly without any fuss. I haven't changed anything and it just worked.