Does this happen in the Help Vault too? I can’t recreate this problem. It might be related to a plugin, or more likely a theme or CSS snippet.
And what version of Obsidian? What OS?
I tested with “Readable line length” turned on and off. That didn’t make a difference. I tested with a small image and a very large image.
Or at least can you give an example or a screenshot/screencapture? Does it happen on every image? Or just images below or above a certain size?