Doesn't work anymore on VS Code version1.135

Type: <b>Bug</b>

I tried using claude code for VS Code on a remote server session vs code and it kept breaking , ending up disconnecting me from the server. I switched back to 1.134 and it works fine now.

Extension version: 2.1.248
VS Code version: Code 1.134.0 (110a328ea54b42367b803ec53ee0bf52ef26b419, 2026-08-18T18:24:44Z)
OS version: Windows_NT x64 10.0.26200
Modes:
Remote OS version: Linux x64 5.15.167.4-microsoft-standard-WSL2
Remote OS version: Linux x64 6.12.11-1.el8.x86_64

<details>
<summary>System Info</summary>

|Item|Value|
|---|---|
|CPUs|AMD Ryzen 9 7900X 12-Core Processor (24 x 4691)|
|GPU Status|2d_canvas: enabled<br>GPU0: VENDOR= 0x10de, DEVICE=0x2702 [NVIDIA GeForce RTX 4080 SUPER], DRIVER_VENDOR=NVIDIA, DRIVER_VERSION=32.0.16.1088 ACTIVE<br>GPU1: VENDOR= 0x1002, DEVICE=0x164e [AMD Radeon(TM) Graphics], DRIVER_VERSION=32.0.11034.2<br>GPU2: VENDOR= 0x10de, DEVICE=0x2702 [NVIDIA GeForce RTX 4080 SUPER], DRIVER_VERSION=32.0.16.1088<br>GPU3: VENDOR= 0x1414, DEVICE=0x008c [Microsoft Basic Render Driver], DRIVER_VERSION=10.0.26100.8972<br>Machine model name: <br>Machine model version: <br>direct_rendering_display_compositor: disabled_off_ok<br>gpu_compositing: enabled<br>multiple_raster_threads: enabled_on<br>opengl: enabled_on<br>rasterization: enabled<br>raw_draw: disabled_off_ok<br>skia_graphite: disabled_off<br>trees_in_viz: disabled_off<br>video_decode: enabled<br>video_encode: enabled<br>webgl: enabled<br>webgpu: enabled<br>webnn: disabled_off|
|Load (avg)|undefined|
|Memory (System)|127.11GB (84.21GB free)|
|Process Argv|--crash-reporter-id dcaabbfd-1a79-47a2-a4bc-c3f98c98afef|
|Screen Reader|no|
|VM|0%|

|Item|Value|
|---|---|
|Remote|WSL: Ubuntu-24.04|
|OS|Linux x64 5.15.167.4-microsoft-standard-WSL2|
|CPUs|AMD Ryzen 9 7900X 12-Core Processor (22 x 0)|
|Memory (System)|62.36GB (59.72GB free)|
|VM|0%|

|Item|Value|
|---|---|
|Remote|SSH: htcf.wustl.edu|
|OS|Linux x64 6.12.11-1.el8.x86_64|
|CPUs|Intel(R) Xeon(R) Silver 4214 CPU @ 2.20GHz (48 x 2304)|
|Memory (System)|187.56GB (139.39GB free)|
|VM|0%|
</details><details>
<summary>A/B Experiments</summary>

vsliv368cf:30146710
vswsl492:30256859
binariesv615:30325510
nativeloc1:31344060
dwcopilot:31170013
dwoutputs:31242946
copilot_t_ci:31333650
e5gg6876:31282496
pythonrdcb7:31342333
6518g693:31463988
aj953862:31281341
envsactivate1:31551504
cloudbuttont:31379625
3efgi100_wstrepl:31403338
bj468946:31457056
ec5jj548:31422691
cp_cls_t_966_ss:31526232
4je02754:31466945
8hhj4413:31478653
cp_cls_c_1081:31454833
conptydll_true:31498968
e9c30283:31461165
46204921:31447328
control_6dc23131:31555649
ei9d7968:31496641
chat:31457767
8hig5102:31480529
89g7j272:31518289
i2gc6536:31499202
52612955:31516516
ddid_t:31478206
hmra_i5g22:31518061
7df3h592:31512476
cp_cls_t_1082:31535311
logging_enabled_new:31498466
db5d2638:31499441
jb_cp_cls_t_632:31543129
56dj4588:31512888
32d76977:31512328
ha629193:31508444
a1ije391_t:31540920
jbcp_cls_pctr_t:31531130
61138546:31518536
cp_intellij_t_nes:31548657
jf4hg949:31526829
ahp-both-windows:31556933
sessions_3:31532893
ihg5j128:31534457
f412h606:31551416
7g2b5551:31542111
nes-ex-cf-euporie-03:31542868
eupheme-04-uxfix:31574415
enable_editor_pane_layout:31569726
allow-none:31555437
ac562147:31564510
c7c27ce7:31554789
1h923230:31564177
0dg73464:31554319
treatment-23-1:31555779
unuse_dynamic_mcp:31555281
0d8dfbc3:31570291
maidictation:31565333
0c1h4866:31566224
session-mark-done:31558131
5b8j3302:31564601
mangle-name-treatment:31572634

</details>

<!-- generated by issue reporter -->