[BUG] Git issue for VSCode Claude code extension

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?

After installing claude code extension on vscode for version 2.1.87 - I get the error mentioned below.
I set up the environment variable but the warning exists still.

What Should Happen?

This warning should not be displayed as Git is installed and the variable is also set.

Error Messages/Logs

Error: Claude Code on Windows requires git-bash (https://git-scm.com/downloads/win). If installed but not in PATH, set environment variable pointing to your bash.exe, similar to: CLAUDE_CODE_GIT_BASH_PATH=C:\Program Files\Git\bin\bash.exe

Extension logs - 
2026-03-30 19:24:42.671 [info] Getting authentication status
2026-03-30 19:24:42.672 [info] OAuth tokens found in secure storage
2026-03-30 19:24:42.673 [info] AuthManager initialized
2026-03-30 19:24:43.666 [info] Received message from webview: {"type":"request","requestId":"kmw75a53p6","request":{"type":"init"}}
2026-03-30 19:24:43.688 [info] Getting authentication status
2026-03-30 19:24:43.700 [info] OAuth tokens found in secure storage
2026-03-30 19:24:43.878 [info] Getting authentication status
2026-03-30 19:24:43.878 [info] OAuth tokens found in secure storage
2026-03-30 19:24:43.883 [info] Received message from webview: {"type":"request","requestId":"4ug3odcrnm4","request":{"type":"get_claude_state"}}
2026-03-30 19:24:43.983 [info] Loading config cache by launching Claude...
2026-03-30 19:24:43.984 [error] Failed to load config cache: Error: Claude Code on Windows requires git-bash (https://git-scm.com/downloads/win). If installed but not in PATH, set environment variable pointing to your bash.exe, similar to: CLAUDE_CODE_GIT_BASH_PATH=C:\Program Files\Git\bin\bash.exe
2026-03-30 19:24:43.984 [error] Error processing client request: Error: Claude Code on Windows requires git-bash (https://git-scm.com/downloads/win). If installed but not in PATH, set environment variable pointing to your bash.exe, similar to: CLAUDE_CODE_GIT_BASH_PATH=C:\Program Files\Git\bin\bash.exe
2026-03-30 19:24:43.985 [info] Received message from webview: {"type":"request","requestId":"l62rkup4k2g","request":{"type":"get_current_selection"}}
2026-03-30 19:24:43.986 [info] Received message from webview: {"type":"request","requestId":"b6q72p3o1tu","request":{"type":"get_asset_uris"}}
2026-03-30 19:24:43.988 [info] Received message from webview: {"type":"request","requestId":"kho5qc4dul","request":{"type":"list_sessions_request"}}
2026-03-30 19:24:43.989 [info] Received message from webview: {"type":"request","requestId":"tfgy9qxfxc","request":{"type":"rename_tab","title":"Claude Code","hasPendingPermissions":false,"hasUnseenCompletion":false}}
2026-03-30 19:24:43.990 [info] Received message from webview: {"type":"request","requestId":"tih6w5efydj","request":{"type":"rename_tab","title":"Claude Code","hasPendingPermissions":false,"hasUnseenCompletion":false}}
2026-03-30 19:24:43.997 [info] Received message from webview: {"type":"launch_claude","channelId":"9xtxkxttuld","cwd":"C:\\Users\\omkark","permissionMode":"default","thinkingLevel":"default_on"}
2026-03-30 19:24:44.113 [info] Launching Claude on channel: 9xtxkxttuld
2026-03-30 19:24:44.114 [info] Closing Claude on channel: 9xtxkxttuld
2026-03-30 19:24:44.114 [error] Error spawning Claude (on channel 9xtxkxttuld): Error: Claude Code on Windows requires git-bash (https://git-scm.com/downloads/win). If installed but not in PATH, set environment variable pointing to your bash.exe, similar to: CLAUDE_CODE_GIT_BASH_PATH=C:\Program Files\Git\bin\bash.exe
2026-03-30 19:24:44.119 [info] Received message from webview: {"type":"interrupt_claude","channelId":"4ug3odcrnm4"}
2026-03-30 19:24:44.119 [warning] Channel not found: 4ug3odcrnm4

Steps to Reproduce

1. Install VSCode Claude Code Extension
2. Login with Claude account

Claude Model

None

Is this a regression?

Yes, this worked in a previous version

Last Working Version

_No response_

Claude Code Version

2.1.87

Platform

Anthropic API

Operating System

windowsOS

Terminal/Shell

cmd(windowsOS)

Additional Information

_No response_