[BUG] Extension silently hangs at "Determining..." while continuously consuming session usage

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?

Environment

• Extension: anthropic.claude-code
• Version: 2.1.94
• Editor: Visual Studio Code

Describe the bug
The extension entered a stuck state displaying only "Determining..." indefinitely,
with no error, no timeout, and no user-visible indication of failure.

Because there was no feedback, I sent additional messages assuming they weren't
being received. Each message was processed (token-consumed) by the backend, but
produced zero output. By the time I identified the hang, session usage had
jumped from ~0% to 89% with no productive work completed.

What Should Happen?

Steps to Reproduce

1. Start a task in Claude Code (VSCode extension)
2. Extension shows "Determining..." and never progresses
3. User sends follow-up messages — each one burns session quota silently
4. No error is ever shown; session eventually nears limit

Expected behavior

• Show a visible error or timeout after a reasonable period of no progress
• Do not silently consume quota in a hung state
• Distinguish UI state between "processing" and "stuck/failed"

Actual behavior

• Spinner shows "Determining..." forever
• Backend continues accepting and billing messages
• No timeout, no error surfaced to user

Additional context

• Session usage reached 89% (resets in ~4 hours at time of incident)
• Extra usage charges were incurred as a result
• Screenshots available upon request

Error Messages/Logs

Steps to Reproduce

The session was opened via the Claude Code icon in the upper right corner of VS Code. The problem I encountered today was that after reconnecting to the Linux server, I continued asking questions from yesterday's session, but then it got stuck with no feedback or response.

Claude Model

None

Is this a regression?

Yes, this worked in a previous version

Last Working Version

_No response_

Claude Code Version

2.1.94

Platform

Other

Operating System

Windows

Terminal/Shell

VS Code integrated terminal

Additional Information

_No response_