I would like to create a custom image (using mkosi), upload it as a vhd (using qemu-img) to my storage account, so that it supports confidential VMs. What should I do?

Hi cloud D,

I understand that you are trying to create a VM using the custom image (using mkosi and upload it as a VHD using qemu-imgand) and when you select the "Security Type" of the VM as "Confidential VM", it shows "Trusted launch virtual machine is required when using 1P Gallery images." This is because you need to select Trusted launch VM type while creating the Image.

The security type on the image definition should be set to ConfidentialVMSupported as the image source does not have VM Guest state information and confidential disk encryption:

Could you please let me know the security type of the image definition and also explain the steps taken while creating the image.

Please refer to the document about Confidential VM supported images.
https://learn.microsoft.com/en-us/azure/confidential-computing/create-confidential-vm-from-compute-gallery#confidential-vm-supported-images

https://learn.microsoft.com/en-us/azure/confidential-computing/how-to-create-custom-image-confidential-vm

Please let me know if you have any questions.

Thank you