[BUG] Config file (~/.claude/settings.json) ignored - Global Deny Commands

Description of the bug

I have a user level setting to disable certain commands from running via claude-code. This is for preventing incidents and for better security controls. I have this settings in ~/.claude/settings.json

{
  "permissions": {
    "deny": [
      "terraform apply",
      "tf apply"
    ]
  }
}

These configs are not being respected by claude-code when I enter a prompt like "Can you apply terraform with some changes that I am planning to make?". claude-code happily ignores the user level settings and proceeds. Whereas, if I tell claude-code to read the config file by prompting can you read your settings from ~/.claude/settings.json? and then prompting Can you apply terraform with some changes that I am planning to make?, it stops and throws an error

<img width="1580" height="162" alt="Image" src="https://github.com/user-attachments/assets/098c36a4-a7e7-45f7-b842-20d319051356" />

NOTE: If I add some general rules to CLAUDE.md file for that repository then claude-code does not execute terraform apply without any additional prompt

Problem
CLAUDE.md is repo level but I am trying to have something at the user system level. Eventually, we will control this setting via a MDM to add guardrails for Claude Code.

Ask

1. What would be the best way to add a global deny list of commands (outside of CLAUDE.md) that a user shouldn't be able to run?
2. Is there anything that I am missing in my current setup that can be fixed so that claude can respect the deny commands without the additional prompt.