Conversation history removed after long agent/tool output in v2.1.89

Description

Starting in Claude Code v2.1.89, conversation history from earlier turns is being removed/compressed after a single response that includes large output (long agent results + file reads). This happens even very early in a conversation (2-3 turns in).

Steps to Reproduce

1. Start a new Claude Code session (v2.1.89, Windows 11, 1M context Opus 4.6)
2. Ask Claude to explore a medium-sized repo (triggers multiple file reads)
3. In the follow-up, ask a question that triggers multiple Agent tool calls returning large results
4. Claude responds with a long detailed answer
5. Result: The first interaction (user message + Claude's response) is completely gone from the terminal. The conversation appears to start mid-way through, with only the most recent large response visible.

Expected Behavior

Earlier conversation turns should remain visible and accessible in the terminal, regardless of how long a subsequent response is. Long output should not cause prior history to be dropped.

Actual Behavior

After a response involving ~3 large Agent results + extensive file reads + a long text response, the entire first exchange (user question + Claude's detailed repo analysis) was removed. The terminal shows the conversation starting from the second response onward.

Environment

• Claude Code version: v2.1.89
• OS: Windows 11 Enterprise 10.0.26200
• Shell: bash (git bash)
• Model: Opus 4.6 (1M context)
• Terminal: Default Claude Code CLI terminal

Additional Context

The conversation that triggered this involved:

• Multiple Read tool calls on large files
• 3 concurrent Agent (subagent) calls, each returning ~3000+ words of analysis
• A subsequent long markdown response (~500 lines)

After this, the first conversation turn was no longer visible — the terminal started from the second response as if the first exchange never happened.

This behavior was not present in prior versions and started occurring specifically with v2.1.89.