Hi, are you adding the account through the iPhone Mail settings or inside the Microsoft Outlook app?
On your iPhone, open Safari, go to https://account.microsoft.com, and sign in fully using your email and password, then complete any security prompts there until you reach your account page. Next, go to Security, then Advanced security options, and select “Sign me out” of all sessions. After that, restart your iPhone, open the Outlook app, and add the account again. This forces a fresh authentication session and clears the mismatch error by syncing your latest security verification state.