[BUG] v1.0.98 is not reading project .mcp.json and rewriting .claude/settings.local.json

Environment

• Platform (select one):
• [ ] Anthropic API
• [ ] AWS Bedrock
• [ ] Google Vertex AI
• [x] Other: Claude Code
• Claude CLI version: 1.0.98
• Operating System: WIndows 11
• Terminal: <!-- e.g. iTerm2, Terminal App -->

Bug Description

Version 1.0.98 only loads the gloablly configured MCP servers and ignores the local .mcp.json file. Also when a global MCP server is used it completely rewrites permissions already set in .claude/settings.local.json from scratch.

Steps to Reproduce

1. 1.0.98 installed
2. claude mcp list -> only globally configured MCPs are shown
3. revert to 1.0.96 -> all MCPs are shown again

Expected Behavior

All MCP servers should be shown as usual.

Actual Behavior

While Claude is auto updating when asked to use an MCP server, it even sees the server and then after the auto-update in the same session the MCPs are gone.

Thinking…

  Let me check the available playwright tools from my list. Looking at my available tools, I can see these playwright related tools:

  - mcp__playwright__browser_navigate
  - mcp__playwright__browser_take_screenshot
  ....
  - mcp__playwright__browser_hover
  - mcp__playwright__browser_console_messages

  Wait, it seems like these tools might not be enabled or available.