My shihtzu is suddenly breathing heavily while sleeping/ resting. I can see his nostril hair moving fast due to his fast breathing. Is it something I should be worried about? I can see his stomach moving faster as well due to this, and observed him kind of sneeze twice around me.

Hi, brachycephalic breeds like these can have some amount of breathing issues due to the anatomy of their face. That being said a respiratory issue should not be taken lightly, you should get a detailed physical examination by your veterinarian and a cardiac evaluation if the attending doctor suggests based on examination. An x ray of the chest can also be done.