[BUG] MCP server broken on 1.0.120 release

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 1.0.120 release breaks the MCP server.

{
  "mcpServers": {
    "claude": {
      "command": "claude",
      "args": [
        "mcp",
        "serve"
      ]
    },
...

What Should Happen?

MCP server should provide the tools, as per documentation.

Error Messages/Logs

Steps to Reproduce

Install the latest binary:

$ npm -g install @anthropic-ai/claude-code
$ claude --version
1.0.120 (Claude Code)

Claude MCP Server
│ Status: ✔ connected
│ Command: claude
│ Args: mcp serve
│ Config location: /Users/username/github/claude/.mcp.json
│ Capabilities: none

$ npm -g uninstall @anthropic-ai/claude-code
$ npm -g install @anthropic-ai/claude-code@1.0.119

Claude MCP Server
│ Status: ✔ connected
│ Command: claude
│ Args: mcp serve
│ Config location: /Users/username/github/claude/.mcp.json
│ Capabilities: tools
│ Tools: 15 tools
│
│ ❯ 1. View tools
│   2. Reconnect

Claude Model

Sonnet (default)

Is this a regression?

Yes, this worked in a previous version

Last Working Version

1.0.119

Claude Code Version

1.0.120 (Claude Code)

Platform

Anthropic API

Operating System

macOS

Terminal/Shell

Terminal.app (macOS)

Additional Information

_No response_