[BUG] Claude Code Extension in VS Fails

Preflight Checklist

• [x] I have searched existing issues and this hasn't been reported yet
• [x] This is a single bug report (please file separate reports for different bugs)
• [x] I am using the latest version of Claude Code

What's Wrong?

Attempting to query using Claude Code hangs and eventually returns with an arbitrary API Connection Error
<img width="829" height="464" alt="Image" src="https://github.com/user-attachments/assets/0d6b9833-cc3b-44b3-9f2a-092de6ff4692" />`

What Should Happen?

Prompt should query appropriately.

Error Messages/Logs

2025-12-09 15:23:42.262 [info] Received message from webview: {"type":"io_message","channelId":"tg5j400u6a","message":{"type":"user","uuid":"bad9e666-5a7a-442b-9e1d-da3b71cc57df","session_id":"","parent_tool_use_id":null,"message":{"role":"user","content":[{"type":"text","text":"what is a cat"}]}},"done":false}
2025-12-09 15:23:42.454 [info] From claude: 2025-12-09T21:23:42.454Z [DEBUG] LSP Diagnostics: getLSPDiagnosticAttachments called
2025-12-09T21:23:42.454Z [DEBUG] LSP Diagnostics: Checking registry - 0 pending

2025-12-09 15:23:42.454 [info] From claude: 2025-12-09T21:23:42.454Z [DEBUG] Hooks: Found 0 total hooks in registry
2025-12-09T21:23:42.454Z [DEBUG] Hooks: checkForNewResponses returning 0 responses
2025-12-09T21:23:42.454Z [DEBUG] [TeammateMailbox] getTeammateMailboxAttachments called: envAgentName=undefined, isTeamLead=false, resolved agentName=undefined, teamName=undefined
2025-12-09T21:23:42.454Z [DEBUG] [TeammateMailbox] Not checking inbox - not a teammate or team lead

2025-12-09 15:23:42.457 [info] From claude: 2025-12-09T21:23:42.457Z [DEBUG] Getting matching hook commands for UserPromptSubmit with query: undefined
2025-12-09T21:23:42.457Z [DEBUG] Found 0 hook matchers in settings
2025-12-09T21:23:42.457Z [DEBUG] Matched 0 unique hooks for query "no match query" (0 before deduplication)

2025-12-09 15:23:42.556 [info] From claude: 2025-12-09T21:23:42.556Z [ERROR] Error streaming, falling back to non-streaming mode: Connection error.

2025-12-09 15:26:41.628 [info] From claude: 2025-12-09T21:26:41.628Z [ERROR] Error in non-streaming fallback: Connection error.
2025-12-09T21:26:41.628Z [ERROR] "Error: Error: Connection error.\n    at makeRequest (B:/~BUN/root/claude.exe:1234:4547)\n    at processTicksAndRejections (native:7:39)"

2025-12-09 15:26:41.882 [info] From claude: 2025-12-09T21:26:41.882Z [DEBUG] Getting matching hook commands for Stop with query: undefined
2025-12-09T21:26:41.882Z [DEBUG] Found 0 hook matchers in settings
2025-12-09T21:26:41.882Z [DEBUG] Matched 0 unique hooks for query "no match query" (0 before deduplication)

Steps to Reproduce

1. Open VS Code
2. Open the Claude Code for VS Code extension window
3. Attempt to query for any information.

Claude Model

Sonnet (default)

Is this a regression?

I don't know

Last Working Version

_No response_

Claude Code Version

2.0.62

Platform

Anthropic API

Operating System

Windows

Terminal/Shell

VS Code integrated terminal

Additional Information

Workaround: Using a standard Terminal and running claude works fine. It's only within the VS Code window that it fails.

Attempted Fixes:

1. Reboot PC
2. Reboot VS Code
3. Uninstall/reinstall Claude plugin
4. Logout/Login to Claude Code