[BUG] Server-side rate limits break parallel agent workflows — request transparent auto-retry

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?

Summary

On the Max plan running parallel multi-Agent workflows, Claude Code repeatedly surfaces server-side rate-limit errors as terminal failures instead of retrying them transparently. This breaks AFK runs and forces manual re-dispatch of up to 7 threads per incident.

Error

API Error: Server is temporarily limiting requests (not your usage limit) · Rate limited

Note the error explicitly states this is NOT a usage-limit issue — it's Anthropic-side capacity throttling, distinct from the plan quota.

Repro

1. Dispatch N concurrent Agent tool calls in a single message (parallel multi-thread workflow).
2. During peak load periods, a subset of agents fail immediately with the above error.
3. Failed agents do not auto-retry — they terminate, losing whatever work was queued.

Hit this three times in ~12 hours across 2026-05-18 evening and 2026-05-19 (Windows, Max plan, 8-thread parallel dispatch pattern).

Impact

• AFK runs lose work silently. When throttle fires while away, the user returns to dead threads with no recovery.
• Manual re-dispatch is high-friction. Re-firing 7+ Agent calls per incident defeats the purpose of parallel orchestration.
• The error UX is misleading. "Rate limited" reads like a quota issue even though the message says otherwise; users on Max reasonably expect their plan to cover bursty workloads.

Requested behavior

Claude Code should auto-retry server-side (non-quota) rate-limit responses transparently with exponential backoff before surfacing a terminal error. The retry behavior should:

• Distinguish server-side throttles (transient, retryable) from account-quota limits (not retryable in-session).
• Use exponential backoff with jitter, capped at a sane ceiling (~60s).
• Apply per-agent so one throttled call doesn't block sibling agents.
• Surface a single user-visible error only after retries are exhausted.

Environment

• Plan: Max
• Platform: Windows
• Workflow: Multi-agent parallel dispatch (8 concurrent Agent calls typical)
• Dates observed: 2026-05-18, 2026-05-19

What Should Happen?

Please fix it

Error Messages/Logs

Steps to Reproduce

Work on several threads in parallel.

Claude Model

Opus

Is this a regression?

Yes, this worked in a previous version

Last Working Version

_No response_

Claude Code Version

4.7

Platform

Other

Operating System

Windows

Terminal/Shell

Windows Terminal

Additional Information

Thanks for your attention to this matter.