[BUG] Streaming text disappears entirely when followed by tool calls in same response

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?

When Claude begins streaming a text response and then makes tool calls (e.g., Read, Grep, Glob) in the same turn, the initial text content is permanently removed from the conversation. It does not remain in the conversation history — scrolling up does not reveal it. The text is fully gone.

This is particularly problematic when:
Claude answers a question but then follows up with tool calls — the answer vanishes
Claude explains its approach before investigating — the explanation disappears mid-read

Expected behavior:
Text streamed before tool calls in the same response turn should remain visible in the conversation history.

Actual behavior:
The text is permanently removed from the conversation when a tool call follows in the same response.

Environment:
VSCode: 1.109.0 (x64)
Claude Code Extension: v2.1.38
OS: Windows (WSL2 — Linux 6.6.87.2-microsoft-standard-WSL2)
Platform: x86_64

What Should Happen?

Text streamed before tool calls in the same response turn should remain visible in the conversation history.

Error Messages/Logs

Steps to Reproduce

Open Claude Code in the VSCode extension
Ask a question that causes Claude to both explain something AND make tool calls in the same response (e.g., ask about a piece of code where Claude will first describe what it thinks, then read a file to confirm)
Observe the streaming text appear
When the tool call begins, the previously streamed text disappears entirely
Scroll up — the text is not preserved anywhere in the conversation

Claude Model

Opus

Is this a regression?

Yes, this worked in a previous version

Last Working Version

_No response_

Claude Code Version

v2.1.38

Platform

Anthropic API

Operating System

Windows

Terminal/Shell

WSL (Windows Subsystem for Linux)

Additional Information

Screenshot of this happening which shows that plan mode is asking me to review design text that is not visible. Every time it asks a new question, the text is removed:
<img width="818" height="1289" alt="Image" src="https://github.com/user-attachments/assets/42f7e167-d09d-4d2b-a51b-0aaf561dc61f" />