[BUG] VS Code extension conflict: enabling bierner.markdown-mermaid breaks Edit/Cascade Diff with "File has not been read yet"

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?

Summary

When the VS Code extension bierner.markdown-mermaid ("Markdown Preview Mermaid Support") is enabled, Claude Code can read files successfully but then fails to edit them using the Edit / Cascade Diff flow.

The failure message is effectively:
File has not been read yet

Disabling the Mermaid extension immediately restores normal editing behavior.

Actual behavior

Read succeeds, but Edit / Cascade Diff behaves as if the file was never read.

Notes

• Paths match exactly between Read and Edit.
• This reproduces consistently.
• The issue appears to be triggered specifically by enabling bierner.markdown-mermaid.
• Disabling that extension fixes the problem immediately.

Additional question

Is Claude Code tracking file-read state in a way that can be invalidated by other VS Code extensions or markdown preview integrations?

Environment

• VS Code: 1.111.0
• Commit: ce099c1ed25d9eb3076c11e4a280f3eb52b4fbeb
• Electron: 39.6.0
• Chromium: 142.0.7444.265
• Node.js: 22.22.0
• OS: Darwin arm64 25.3.0
• Claude Code extension: 2.1.76

What Should Happen?

If Read succeeds for a file, Edit / Cascade Diff should be able to modify that same file normally.

Error Messages/Logs

File has not been read yet

Steps to Reproduce

1. Open VS Code with Claude Code installed.
2. Enable bierner.markdown-mermaid.
3. Ask Claude Code to read a file.
4. Confirm the Read succeeds and returns the file content.
5. Ask Claude Code to edit the same file using Edit / Cascade Diff.
6. Edit fails with File has not been read yet.
7. Disable bierner.markdown-mermaid.
8. Retry the same workflow.
9. Editing now works.

Claude Model

None

Is this a regression?

I don't know

Last Working Version

_No response_

Claude Code Version

2.1.76

Platform

Anthropic API

Operating System

macOS

Terminal/Shell

VS Code integrated terminal

Additional Information

_No response_