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Yep - this is a supported Windows operation. The fact that the volume contains SQL Server FILESTREAM data should not play a role here. Stopping the SQL Server services that use the FILESTREAM containers is the correct precaution so that SQL Server is not actively accessing the volume during the operation.
Before proceeding, verify that you have a recent successful backup of the affected databases and FILESTREAM data. Then confirm the volume is NTFS, is the expected basic-disk volume, and that no other applications are actively using it. In addition, check the actual shrinkable space before attempting the 5 TB reduction. The 18 TB of free space does not necessarily mean that 18 TB can be removed. Run:
diskpart
list volume
select volume <volume-number>
shrink querymax
If Windows reports at least 5 TB as available to shrink, you can proceed. You can then use Disk Management → right-click the volume → Shrink Volume, and specify the 5 TB reduction. Windows will relocate movable NTFS data as necessary - you do not need to manually move the FILESTREAM files or reformat the volume.
You shouldn't reduce the underlying iSCSI LUN first - instead shrink the Windows volume/partition first. If you subsequently want to reduce the physical iSCSI LUN to reclaim the unused 5 TB, that is a separate storage operation.
Afterward, verify that the volume is approximately 60 TB, start SQL Server, confirm that all FILESTREAM databases come online normally, and then perform a backup test. The successful backup is the final confirmation that the volume-size issue has been resolved.
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hth
Marcin