[BUG] VS Code extension does not load outputStyle from settings

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?

outputStyle is set in ~/.claude/settings.local.json and the style file exists at ~/.claude/output-styles/lumi-style.md.

Works correctly in terminal CLI — style is injected into system prompt.
Does not work in VS Code extension — style is ignored, only default conciseness instructions are present.

What Should Happen?

When outputStyle is set in settings.local.json (or settings.json), the VS Code extension should inject the referenced style file's content into the system prompt, same as the CLI does.

Error Messages/Logs

Steps to Reproduce

1. Create a custom output style file at ~/.claude/output-styles/lumi-style.md
2. Set "outputStyle": "Lumi Style" in ~/.claude/settings.local.json
3. Start a new session in the VS Code extension
4. Ask Claude "what output style instructions do you see in your system prompt?"
5. Claude does not see the custom style — only default conciseness instructions are present

The same setup works correctly in the terminal CLI.

Claude Model

Opus

Is this a regression?

I don't know

Last Working Version

_No response_

Claude Code Version

2.1.84

Platform

Anthropic API

Operating System

macOS

Terminal/Shell

VS Code integrated terminal

Additional Information

_No response_