In vscode v1.71.2 the window.experimental.windowControlsOverlay.enabled
setting has been disabled by default.
This bug was released in vscode v1.71. It may be related to using RTL languages. I would assume this will be fixed in a point release.
Try disabling this setting:
window.experimental.windowControlsOverlay.enabled
from [windows default close button location moved on its own when updating to v1.71.0][1]