[BUG] APP_NAME in .env file breaks Claude Code terminal input

Environment

• Platform (select one):
• [ ] Anthropic API
• [ ] AWS Bedrock
• [ ] Google Vertex AI
• [x] Other:
• Claude CLI version: 1.0.60 (Claude Code)
• Operating System: macOS (based on /Volumes/Dev/ path structure)
• Terminal: zsh (tested on iTerm2, WezTerm, and Alacritty)

Bug Description

Claude Code terminal becomes unresponsive and displays incorrect input when an .env file contains an APP_NAME variable. The input field shows > mcp/mcp instead of the normal prompt, and commands are not recognized or executed.

Steps to Reproduce

1. Create a directory with an .env file containing APP_NAME="test-app-name"
2. Navigate to that directory in terminal
3. Run claude command
4. Accept the trust dialog by selecting "Yes, proceed"
5. Observe that the input field displays > mcp/mcp instead of normal prompt
6. Try to enter any command - input is not recognized

Expected Behavior

Claude Code should start normally with a functional command prompt, regardless of the presence of an .env file with APP_NAME variable. The input field should accept and execute commands as usual.

Actual Behavior

• The input field shows > mcp/mcp instead of the expected prompt
• Commands cannot be entered or executed
• The terminal interface becomes non-functional for command input
• The issue appears to be related to the presence of APP_NAME in the .env file

Additional Context

Environment file contents:

APP_NAME="test-app-name"

Terminal output showing the issue:

❯ claude
# [Trust dialog appears and is accepted]
╭─────────────────────────────────────────────────────────────╮
│ ✻ Welcome to Claude Code!                                   │
│                                                             │
│   /help for help, /status for your current setup            │
│                                                             │
│   cwd: /Volumes/Dev/xxx/xxx/test  │
╰─────────────────────────────────────────────────────────────╯

# [Tips section appears normally]

╭────────────────────────────────────────────────────────────╮
│ > /mcp                                                     │
│                                                            │
│ [Input field is unresponsive]                              │
╰────────────────────────────────────────────────────────────╯

Additional notes:

• The issue seems to be specific to the APP_NAME environment variable
• Shell: zsh
• The issue is reproducible consistently when the .env file contains APP_NAME
• Cross-terminal testing: Issue confirmed across multiple terminal applications:
• iTerm2
• WezTerm
• Alacritty
• This indicates the bug is in Claude Code itself, not terminal-specific