Postdoc position "on hold" due to covid-19
A signed offer letter is normally a valid contract.  Usually it is the only contract document.  Only someone who has read the offer letter can give you a perfect answer to this question.

They have announced their intention to break the contract.  That is illegal unless the offer letter says otherwise.  Moving on is probably your best option.  

There are two possibilities:


The university is unable to pay you, so they are forced to do something that could potentially cause them a lot of harm in the form of bad press or litigation.
They did this voluntarily or out of incompetence, in which case the university is a bad place to work and you are lucky not to be working there.


In either case, you should look for employment elsewhere.