External email address not found when using the share option from SharePoint, Teams or OneDrive

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Hello all,

I am having a hard time finding any articles in regard to the fact we are no longer able to share documents with externals while every setting we can find states the opposite. We have recently only changed the main SharePoint site (which was a classic teams site) to a modern communication site. We know this can have an effect on the way the sharing settings were set on the old site. As well as the fact this can only be done by a Global Admin or SharePoint Admin not a site owner (which I am also).

Our sharing settings are as follows:

Sorry the text is in Dutch but the English text is located on the same rows so should be easily translated. We do not allow external or guests access without verification so that is the chosen setting for the whole organisation at any point in the SharePoint environment.

On the main site this is the same:

On Organisation level this is also the case:

However this is the error we receive when anyone else then an admin tries to share a document:

The message states we (SharePoint, Teams or OneDrive) cannot find an exact match. The address is my personal email address so I know it exists.

We have checked all settings in the backend with PowerShell but couldn't find one setting that would block SharePoint in resolving external email addresses or why this would be different from the old main site in the same organisation.

If there is anyone who has dealt with a similar issue please  let me know! I will enter a ticket at Microsoft but if there is an easy way to fix this let me know.

Thanks!