Okay, there’s actually a speculated reason for this: while you’re dreaming, your body is paralyzed but your brain is not. When you go into fight-or-flight when you’re dreaming, your brain starts trying to take sensory input from both your dream self and your real self. As a result, your brain is receiving mixed signals: your arm is moving and it’s not moving; you’re successfully controlling your arm but you can’t control your arm. The result is that it feels like it takes a significant amount of effort to move your arm, and your arm moves slowly.
My own personal experience seems to support this: if I casually run or hit something in a dream, then it happens as expected. If I’m in fight-or-flight mode, then my actions occur in slow motion. However, I got lucky and became lucid during one such moment, and decided to try consciously focus on just moving my dream arm, and I was no longer moving in slow motion.
I had a fascination with dreams, especially lucid dreaming, several years ago. I don’t have a specific article about it anymore, just some info I came across a while back.