Line breaks render on same line in Claude Code VSCode extension on code-server (Home Assistant OS)

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 using the Claude Code extension input field, pressing Enter creates a new line (the cursor moves down), but the text visually renders all on the same line. The line break is inserted but not displayed correctly.

What Should Happen?

When pressing Enter in the Claude Code extension input field, the text should visually break into a new line, matching the actual cursor position. Line breaks should render correctly in code-server environments, just as they do in VSCode desktop.

Error Messages/Logs

Steps to Reproduce

Open Claude Code extension panel in code-server on Home Assistant OS
Type some text in the input field
Press Enter for a new line
Type more text
Expected: Text appears on separate lines
Actual: All text appears on the same line, despite the line break being inserted
Notes

Claude Model

None

Is this a regression?

Yes, this worked in a previous version

Last Working Version

_No response_

Claude Code Version

2.1.83

Platform

Anthropic API

Operating System

macOS

Terminal/Shell

Terminal.app (macOS)

Additional Information

Environment
Home Assistant OS (Linux 6.12.67-haos)
code-server (built into HA OS)
Claude Code VSCode extension (latest)
Steps to reproduce