watchOS update as well, hopefully they have fixed the battery-draining bug. Prior to the most recent update, my watch would still have 50% battery at the end of a long day; now it drains after eight hours.
The iPhone will then switch to downloading the update to the watch over WiFi which should be quite a bit faster.
You will probably be prompted one or more times to reconnect the Watch. Go ahead and hit cancel.
You must do this from the Bluetooth settings in Settings. Turning Bluetooth off from Control Center doesn't actually turns it off. It just disconnects most devices. It does not disconnect the Watch.
Once it finishes download and says it is preparing you can turn Bluetooth back on.