Dictation icon missing on Apple Watch Ultra 2

If anything else did not work, and to rule out a software issue, erase the watch and pair it again, setting it up as a new device. You will only lose your created Watch faces and may have to activate the cards in your Wallet app again.

Then test the dictation in Messages again.

Unpair and erase your Apple Watch - Apple Support

Did you check, that on your watch -> Settings -> General -> Dictation is enabled?

Any restrictions set up, or is a profile installed?

Did you check the language settings on your Apple Watch?

Do you not see this first …

… followed by, once you tap in the “Create Messge” area:

Where did you buy your Ultra 2?

My Ultra 2 does not have these issues, so it can only be a country specific watchOS issue.

Just to be sure that Apple Techs are aware of this, let them know directly by using the Feedback link:

Feedback - Apple Watch - Apple

Can you use the Microphone on your iPhone, if you are answering messages?

Did you check the apps allowed to use the Microphone on your iPhone in Settings/Privacy & Security/Microphone?

If you see this screen on your watch when trying to type:

Tap on the scribble icon (or microphone icon) in the right corner to get back to the icons for all input options:

After that tap on the keyboard icon to bring up the keyboard.

And the watch will remember your input method for the next time.