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.