[BUG] Starting with version 2.1.2 terminal in VS Code is a mess

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?

Instead of normally formatted output, the terminal looks very messy now with f.e name of active subagent repeated 10 times and lots of endlines in between.

What Should Happen?

Normal output like before.

Error Messages/Logs

Steps to Reproduce

1. Just run claude and ask it to anything
2. Terminal would be quickly broken

Claude Model

Opus

Is this a regression?

Yes, this worked in a previous version

Last Working Version

_No response_

Claude Code Version

2.1.2

Platform

Anthropic API

Operating System

Windows

Terminal/Shell

VS Code integrated terminal

Additional Information

Sometimes it is like this:

<img width="1133" height="701" alt="Image" src="https://github.com/user-attachments/assets/6d59647d-74aa-496d-a9d6-f13e10110520" />

Sometimes like this:

<img width="1383" height="620" alt="Image" src="https://github.com/user-attachments/assets/acb154bf-07b3-459b-ab52-b6264e8e3bf7" />

There is always more output added and scroll keeps growing.

Resizing window sometimes helps to clean it out, but it always eventually switches back to buggy output.