Hello,
I had the same issue. Since the Apple Watch was not first unpaired from your old iPhone you will need to erase it before you can p[air it to your new iPhone.
Transfer data from your previous iOS or iPadOS device to your new iPhone, iPad, or iPod touch - Apple Support
"If you have an Apple Watch and you got a new iPhone, unpair your Apple Watch from your previous iPhone before you set up your new device. Unpairing automatically backs up your Apple Watch so you can restore it after you pair with a new iPhone."
Unpair and erase your Apple Watch - Apple Support
"How to erase your Apple Watch if you don't have your iPhone
- On your Apple Watch, tap Settings > General > Reset > Erase All Content and Settings.
- Type your password if prompted.
- For GPS + Cellular models, choose to keep or remove your cellular plan.
- If you want to pair your Apple Watch and iPhone again, keep your plan.
- If you don't want to pair your Apple Watch and iPhone again, remove your plan. If you aren't going to pair with a different watch or iPhone, you might need to contact your carrier to cancel your cellular subscription.
- Tap Erase All to confirm. This resets your Apple Watch to the factory settings.
Try these steps if you forgot your passcode.
Erasing all content and settings erases all media, data, and settings from your Apple Watch, but it does not remove Activation Lock. To remove Activation Lock, unpair the watch first. Before your watch is erased, a backup of its contents is created on your iPhone."
I hope this helps.