Combat is CPU bound, especially with multiple actors. That can’t be changed with settings. Tiger Lake G7 can handle GPU side on mode 3 or lower rather well (1080p).
As this is some laptop or alike you can check the power mode it can use. You want Windows in performance mode, not balanced, and check BIOS for power/TDP setting - if it can be set big higher. Cleaning/checking fans and radiators for dust is also recommended.
It’s either some powersaving setting, or temperatures or, very likely, an addon issue.
Have you tried without any addons? Some PVP addons are hard on the CPU.
I have tried without add-ons and same issue, the only time I don’t lag in 3v3 is when I go windowed mode and turn render to lowest but the game is very low graphic and not HD which makes it harder to track spells character motions
Are you running on battery or plugged in?
Check if the energy mode is set to performance when gaming.
Also use a tool like HWinfo to check temperatures and clockspeeds of your CPU and GPU when you play.
The CPU should boost to 4,2Ghz and not throttle or else you will have poor performance.
What brand is your laptop? If it’s a thin Lenovo or something like that, they are throttling at 70° already it seems.
In my older benchmarks 1165G7 can pull around 50 FPS 1080p mode 3 for a mass combat scenario (way more than 3v3) and around 100 FPS outside of combat so here it looks like some game/Windows issue or some CPU power/thermals problem as mentioned above.
If you used addons before then to test without addons you would have to clean a WTF folder just to be sure.
If the checks mentioned above are fine you can also check Windows Task Manager to see if some app/process is using a lot of CPU while WoW is running. Sometimes Windows gets a weird app conflict and an app will go crazy for no reason.