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He Possessed the other stranges body yes but the damned souls are wholly seperate entities who came because of that taboo being broken to drag away strange's soul. We already discussed why this isn't a reliable feat to saying is something like AP from the souls I mean also the fact he literally weaponised actual souls of the damned that are there to take away the souls of those attempting to possess a dead I'd say that's pretty solidly soul manip and considering wanda could endure their assault for as long as she did I'd say she has some resistanceIs it Soul Manipulation it might be Possession since we see the Damned Souls in his eyes, we see them drowning Dr Strange's consciousness, then we also see Strange's body jerk around.
The Cloak of Damned Souls seems to give the wielder: Flight, Shockwave Generation or Air Manipulation, Energy Absorption and Barrier Creation, etc.
It could be an explanation why Wanda was having a hard time escaping since prior to her being surrounded we're shown that the Damned Souls were able to absorb her Magic.