A unified data governance solution that helps manage, protect, and discover data across your organization
Yes, this will work.
I tested a similar configuration and that the Default label is applied when the document is created, and the Office client then immediately evaluates the content against the client-side auto-labeling rules.
If the configured Sensitive Information Types (SITs) are detected and the Confidential-Sec label has a higher priority, the label is automatically upgraded to Confidential-Sec.