[BUG] VS Code extension not responding - stuck on "Forging/Cooking/Pondering..."

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?

Environment:

• OS: Windows 11
• VS Code version: [ta version]
• Claude Code CLI: v2.1.6
• Node.js: v24.12.0

Problem:
The VS Code extension panel shows loading animations (Forging, Cooking, Pondering, etc.) indefinitely but never returns a response.

What works:

• Claude Code CLI in terminal works perfectly
• claude.ai web interface works

What I tried:

• Reinstalling the extension
• Reinstalling Node.js
• Reinstalling Claude Code CLI
• Restarting VS Code

Expected: Response from Claude in the VS Code panel
Actual: Infinite loading, no response ever

What Should Happen?

The VS Code extension should respond to messages

Error Messages/Logs

No error message - just infinite loading animation (Forging, Cooking, Pondering...)

Steps to Reproduce

1. Open VS Code with Claude Code extension
2. Open the Claude Code panel
3. Send any message like "hello"
4. Extension shows loading animation forever, never responds

Claude Model

Opus

Is this a regression?

Yes, this worked in a previous version

Last Working Version

2.1.6

Claude Code Version

Anthropic API

Platform

Anthropic API

Operating System

Windows

Terminal/Shell

PowerShell

Additional Information

_No response_