Ok I made a little bit of progress.
I tried a different power supply, different power cable, and a different iPhone cable. None of those made a difference. The issue remained.
I did try a newer iPhone and could not recreate the issue.
Oh iPhone 12 running iOS 16.1.1 → tethering crash when opening Teams on the laptop.
On iPhone 13 running iOS 16.1.1 → no issues.
Next I will try to factory reset the iPhone 12.