Creating new contact from messages

What is your default Contacts account? If none, please add an email account and enable contacts.

See the pic below

Unlike some Android devices, contacts are neither stored locally on an iPhone nor in SIM. They are synced to an email account that you had Google, iCloud, AOL, Exchange, Outlook, Yahoo or any Other

If you have a corporate email account added through a profile on your device, please check with your organization's system administrator.

iOS updates generally aim to enhance user experience, boost security, and fix bugs rather than disrupt core features. Creating Contact issues after updates might stem from underlying, unmentioned factors. Updates won't typically alter personal data but may refine settings or features. Backup before major updates for safety. Review Apple's update details and backup advice for a smooth process.

This seems purely coincidental so please check the Setting on your device.

See what each update does: About iOS 17 Updates, About iOS 16 Updates, About iOS 15 Updates, About iOS 14 Updates, About iOS 13 Updates, About iOS 12 Updates, and so on...