@GHOST LoL I solved everything with just 1 easy line…
In the phone.conf I added DNS = <pihole ip> and now everything works both in internal and external tests!

phone.conf is now like this:

[Interface]
PrivateKey = <privkey>
Address = 10.8.0.2/32
DNS = 192.168.1.100 # Added this line to send DNS queries through the tunnel to Pi-hole

[Peer]
PublicKey = <pubkey>
AllowedIPs = 0.0.0.0/0, ::/0
Endpoint = <endpoint ip>:51820
PersistentKeepalive = 25