New discovery, if it is helpful to future readers:
Changing the font size/type causes a change.
In my case, I had Kawkab Mono size 10, which is bigger than the default KDE font, Noto Sans, same size, because the latter does not reproduce the issue.
I lowered the size of my font, and 7 is the highest value I could use to get a small context menu, and that is using a 1920x1080 resolution, 100% scale.
To confirm, I changed the resolution to one that is close to what I had on my old laptop, 1368x768, and I was able to get a small context menu with 4 as the system's font size, Kawkab Mono again (because it is the best I could find, that keeps Arabic letters mono as well in Qt Creator's text editor).
So, lower the system font size, if your eyes can tolerate that. Or just use shortcuts.