VHD is of Dynamic VHD type. Please retry with fixed VHD type

You need fixed type VHD to create disk from VHD on Azure. If your disk type is Dynamic, you will see this error.

You can convert disk type with Powershell command as below.

Convert-VHD -Path C:\VM\myDisk.vhd -DestinationPath C:\VM\myDiskFixed.vhd -VHDType Fixed