Fear as a defense mechanism is widely spread among dogs and it’s not that easy to eliminate. Most aggression cases are fear-based and it's a real issue. Continuous exposure to fear produces phobia and/or paranoia.
Dogs act paranoid all of a sudden due to underlying fear, phobia, separation anxiety, or physical health issues. Also a lack of socialisation or past trauma oftentimes trigger severe anxiety.
Quite a few health conditions can make your dog turn paranoid all of a sudden including encephalitis, hypothyroidism, diabetes, and thyrotoxicosis.