[BUG] says "Server is temporarily limiting requests"

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?

Actual Behavior
Claude Code repeatedly attempted the same fix without success, consuming context and/or credits in the process, then halted with a limit error — despite the user not having intentionally triggered high usage.
Additional Context

The error mentions "1M context," suggesting the repeated failed attempts may have filled the context window.
The user has not knowingly enabled or exhausted usage credits.
Suggested workaround in the error (--model flag or enabling usage credits) appears unrelated to the actual problem.

<img width="874" height="448" alt="Image" src="https://github.com/user-attachments/assets/e8c7e9fb-3833-4cae-892a-b0ccd9e6c44e" />
<img width="912" height="390" alt="Image" src="https://github.com/user-attachments/assets/00142997-cc7c-48df-bbcc-8cf563c65ef6" />

What Should Happen?

Expected Behavior
Claude Code should either complete the task or fail gracefully with a clear explanation. Usage limits, if genuinely reached, should be communicated accurately and not after an extended failed task loop.

Error Messages/Logs

Server is temporarily limiting requests
Too many requests right now — try again in a moment.
API Error: Usage credits required for 1M context · turn on usage credits at claude.ai/settings/usage, or use --model to switch to standard context

Steps to Reproduce

Steps to Reproduce

Open Claude Code in the terminal.
Start an agentic coding task (in this case: fixing a dashboard).
Claude Code makes multiple attempts to fix the code, each attempt failing or producing incorrect results.
After several iterations, Claude Code stops entirely and displays the following error:

Server is temporarily limiting requests — Too many requests right now — try again in a moment.
API Error: Usage credits required for 1M context · turn on usage credits at claude.ai/settings/usage, or use --model to switch to standard context

The session cannot be resumed. No further requests are accepted.

Claude Model

Sonnet (default)

Is this a regression?

Yes, this worked in a previous version

Last Working Version

5.6.26

Claude Code Version

1.11187.1 (370d3b)

Platform

Anthropic API

Operating System

macOS

Terminal/Shell

Terminal.app (macOS)

Additional Information

_No response_