iPhone: Safari and Chrome stop working when I connect iPhone to MacBook

As OP said, "Internet sharing is on and all the sub-boxes are checked", I think this is the problem.

Not all apps in iOS can detect and use network coming through iPhone USB. Most of them check only Cellular data, Wi-Fi and Bluetooth for internet

On Mac System Preferences -> Sharing, Internet Sharing by USB cable should be turned off for using iPhone apps.