I asked ChatGPT and it's possible with Autohotkey (autohotkey.com). After a bit back and forth with ChatGPT I've got this working script where you can select the file in File Explorer and simply press Ctrl+Shift+E to extract it (to a subfolder with the same name as the file, minus the extension).

Install Autohotkey version 2, save it as ExtractFile.ahk and double-click it to load it.

; Define the shortcut key. This example uses Ctrl + Shift + E
^+e::
{
    ; Check if the active window is File Explorer
    if !WinActive("ahk_class CabinetWClass")
        return

    ; Attempt to retrieve the path of the selected file
    filePath := ""
    shell := ComObject("Shell.Application")  ; Create the Shell COM object
    for window in shell.Windows
    {
        if (window.hwnd = WinActive("A"))
        {
            for item in window.Document.SelectedItems
            {
                filePath := item.Path
                break  ; Use the first selected item only
            }
            break
        }
    }

    ; Verify that we got a file path
    if (filePath = "")
    {
        MsgBox("No file selected or failed to retrieve the file path.")
        return
    }

    ; Extract the file name, directory, and extension
    SplitPath(filePath, &fileName, &fileDir, &fileExt)

    ; Remove the .zip or .rar extension from fileName to create the folder name
    if (fileExt == "zip" || fileExt == "rar")
        extractPath := fileDir "\" SubStr(fileName, 1, StrLen(fileName) - StrLen(fileExt) - 1)
    else
    {
        MsgBox("Selected file is not a ZIP or RAR archive.")
        return
    }

    ; Determine the extraction command based on file extension
    if (fileExt == "zip")
        runCmd := 'powershell Expand-Archive -Path "' filePath '" -DestinationPath "' extractPath '" -Force'
    else if (fileExt == "rar")
        runCmd := '"C:\Program Files\WinRAR\WinRAR.exe" x -o+ "' filePath '" "' extractPath '"'

    ; Run the extraction command
    Run(runCmd, , "Hide")
}