[BUG] Claude Code extension gets permanently stuck on "clauding..."

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?

TL;DR: Claude Code extension gets permanently stuck on "clauding..." UI with no output, stop button doesn't work, and it burns through usage budget while frozen.

• Extension remains stuck in "clauding..." state and never outputs an answer no matter how long I wait.
• Stop button is non-functional
• Only workaround: typing "stop" in the chat
• Usage budget appears to be consumed during this frozen state

Impact:

• Extension is unusable for majority of requests
• Consuming API credits/usage without producing results
• No way to interrupt the process except typing "stop" command

What Should Happen?

• Claude Code should either complete the request or stop when the stop button is pressed
• Failed requests should timeout gracefully

Error Messages/Logs

Steps to Reproduce

1. Open Claude Code in IDE
2. Submit any request (happens with both simple and complex tasks)
3. Extension enters "clauding..." state
4. No output is ever produced
5. Pressing stop button has no effect
6. Extension continues "working" indefinitely

Claude Model

Sonnet (default)

Is this a regression?

Yes, this worked in a previous version

Last Working Version

unsure

Claude Code Version

2.0.14

Platform

Anthropic API

Operating System

macOS

Terminal/Shell

Other

Additional Information

_No response_