[BUG] CC CLAUDE_CODE_DISABLE_1M_CONTEXT doesn't get respected

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?

When I try to use claude code with the latest upgrade with opus 4.8 as default, it no longer respects the setting env.CLAUDE_CODE_DISABLE_1M_CONTEXT in .claude/settings.json anymore

What Should Happen?

claude should have respected that settings and only use 200k context

Error Messages/Logs

Steps to Reproduce

1. edit .claude/settings.json with env.CLAUDE_CODE_DISABLE_1M_CONTEXT to be 1
2. Start using claude code, context will grow outside of the 200k context limit

Claude Model

Opus

Is this a regression?

Yes, this worked in a previous version

Last Working Version

_No response_

Claude Code Version

2.1.157

Platform

Anthropic API

Operating System

macOS

Terminal/Shell

iTerm2

Additional Information

_No response_