[BUG] VS Code extension causes severe lag when pasting into markdown files

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?

When the Claude Code extension is enabled, copying and pasting text from within a markdown file results in a delay of several seconds (5+), regardless of the amount of text being pasted. This occurs when copying from within the markdown, or from Python interactive window output. Copying text from outside VS Code and pasting it into a markdown file does not seem to create a lag.

What Should Happen?

Paste operations should be instantaneous (under 100ms) when pasting text into markdown files, matching the normal VS Code paste performance when the Claude Code extension is disabled.

Error Messages/Logs

VS Code Output logs show extension host becoming unresponsive during paste operations:
2025-10-07 10:51:57.510 [info] [Window] UNRESPONSIVE extension host: received responsive event and cancelling profiling session
2025-10-07 10:51:59.753 [info] [Window] UNRESPONSIVE extension host: starting to profile NOW
2025-10-07 10:52:03.235 [info] [Window] Extension host (LocalProcess pid: 23180) is unresponsive.
2025-10-07 10:52:05.240 [info] [Window] Extension host (LocalProcess pid: 23180) is responsive.
2025-10-07 10:52:05.241 [info] [Window] UNRESPONSIVE extension host: received responsive event and cancelling profiling session
2025-10-07 10:52:05.241 [info] [Window] UNRESPONSIVE extension host: starting to profile NOW
2025-10-07 10:59:40.893 [info] [Window] Extension host (LocalProcess pid: 23180) is unresponsive.
2025-10-07 10:59:42.321 [info] [Window] UNRESPONSIVE extension host: starting to profile NOW
2025-10-07 10:59:44.627 [info] [Window] Extension host (LocalProcess pid: 23180) is responsive.
2025-10-07 10:59:44.628 [info] [Window] UNRESPONSIVE extension host: received responsive event and cancelling profiling session

Steps to Reproduce

Install and enable Claude Code extension in VS Code
Open any .md (markdown) file in VS Code
Copy text from either:

The same or another markdown file (Ctrl+C / Cmd+C)
Interactive Python window using "Copy cell output"

Attempt to paste into a markdown file (Ctrl+V / Cmd+V)
Result: Paste operation takes several seconds (instead of being immediate)

Claude Model

Sonnet (default)

Is this a regression?

I don't know

Last Working Version

_No response_

Claude Code Version

2.0.8 (Claude Code)

Platform

Anthropic API

Operating System

Windows

Terminal/Shell

VS Code integrated terminal

Additional Information

The Claude Code extension does not need to be actively running for this issue to occur. Simply having the extension enabled in VS Code causes the paste lag, even without running Claude in the terminal or having any active Claude Code sessions.