Does this issue occur when all extensions are disabled?: Yes

• VS Code Version: 1.103.0-insider
• OS Version: Windows 11 24H2 26100.4652

Steps to Reproduce:

1. Click a link in the terminal output like Now listening on https://myapp.dev.localhost:12345
   Easy repro run command like echo "Now listening on https://myapp.dev.localhost:12345" in the terminal and click the link in the text that's output
2. VS Code treats the *.localhost address as external by default and presents the following dialog:
   

*.localhost is a reserved top-level domain (TLD) as per RFC 6761 that resolves to the local loopback address automatically in modern browsers (bypassing the DNS stack). It's also considered a "secure context" by browsers, even when HTTPS is not being used.