[BUG] Claude Code VS Code Extension ignoring settings.json permissions

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?

Claude Code terminal and vs code extension shows all the permissions I have given but ignore in sessions. Like even with permission "Bash(*)", it still ignores it and asks for permission again. It was working great before for previous versions.

What Should Happen?

It should allow all commands for bash terminal for permission "Bash(*)" when "Edit Automatically" is selected.

Error Messages/Logs

Steps to Reproduce

1- Add "Bash(*)" in settings.json or settings.local.json.
2- Use a session which uses bash commands.
3- It will ask for permissions.

Claude Model

None

Is this a regression?

Yes, this worked in a previous version

Last Working Version

_No response_

Claude Code Version

2.1.197 (Claude Code)

Platform

Anthropic API

Operating System

Windows

Terminal/Shell

VS Code integrated terminal

Additional Information

_No response_