diff --git a/ui/src/components/transcript/RunTranscriptView.test.tsx b/ui/src/components/transcript/RunTranscriptView.test.tsx
new file mode 100644
index 00000000..580d7a20
--- /dev/null
+++ b/ui/src/components/transcript/RunTranscriptView.test.tsx
@@ -0,0 +1,60 @@
+// @vitest-environment node
+
+import { describe, expect, it } from "vitest";
+import { renderToStaticMarkup } from "react-dom/server";
+import type { TranscriptEntry } from "../../adapters";
+import { ThemeProvider } from "../../context/ThemeContext";
+import { RunTranscriptView, normalizeTranscript } from "./RunTranscriptView";
+
+describe("RunTranscriptView", () => {
+  it("keeps running command stdout inside the command fold instead of a standalone stdout block", () => {
+    const entries: TranscriptEntry[] = [
+      {
+        kind: "tool_call",
+        ts: "2026-03-12T00:00:00.000Z",
+        name: "command_execution",
+        toolUseId: "cmd_1",
+        input: { command: "ls -la" },
+      },
+      {
+        kind: "stdout",
+        ts: "2026-03-12T00:00:01.000Z",
+        text: "file-a\nfile-b",
+      },
+    ];
+
+    const blocks = normalizeTranscript(entries, false);
+
+    expect(blocks).toHaveLength(1);
+    expect(blocks[0]).toMatchObject({
+      type: "command_group",
+      items: [{ result: "file-a\nfile-b", status: "running" }],
+    });
+  });
+
+  it("renders assistant and thinking content as markdown in compact mode", () => {
+    const html = renderToStaticMarkup(
+      <ThemeProvider>
+        <RunTranscriptView
+          density="compact"
+          entries={[
+            {
+              kind: "assistant",
+              ts: "2026-03-12T00:00:00.000Z",
+              text: "Hello **world**",
+            },
+            {
+              kind: "thinking",
+              ts: "2026-03-12T00:00:01.000Z",
+              text: "- first\n- second",
+            },
+          ]}
+        />
+      </ThemeProvider>,
+    );
+
+    expect(html).toContain("<strong>world</strong>");
+    expect(html).toContain("<li>first</li>");
+    expect(html).toContain("<li>second</li>");
+  });
+});
diff --git a/ui/src/components/transcript/RunTranscriptView.tsx b/ui/src/components/transcript/RunTranscriptView.tsx
index 762f8df4..7bc24c97 100644
--- a/ui/src/components/transcript/RunTranscriptView.tsx
+++ b/ui/src/components/transcript/RunTranscriptView.tsx
@@ -98,16 +98,6 @@ function truncate(value: string, max: number): string {
   return value.length > max ? `${value.slice(0, Math.max(0, max - 1))}…` : value;
 }
 
-function stripMarkdown(value: string): string {
-  return compactWhitespace(
-    value
-      .replace(/```[\s\S]*?```/g, " code ")
-      .replace(/`([^`]+)`/g, "$1")
-      .replace(/\[([^\]]+)\]\([^)]+\)/g, "$1")
-      .replace(/[*_#>-]/g, " "),
-  );
-}
-
 function humanizeLabel(value: string): string {
   return value
     .replace(/[_-]+/g, " ")
@@ -329,7 +319,7 @@ function groupCommandBlocks(blocks: TranscriptBlock[]): TranscriptBlock[] {
   return grouped;
 }
 
-function normalizeTranscript(entries: TranscriptEntry[], streaming: boolean): TranscriptBlock[] {
+export function normalizeTranscript(entries: TranscriptEntry[], streaming: boolean): TranscriptBlock[] {
   const blocks: TranscriptBlock[] = [];
   const pendingToolBlocks = new Map<string, Extract<TranscriptBlock, { type: "tool" }>>();
   const pendingActivityBlocks = new Map<string, Extract<TranscriptBlock, { type: "activity" }>>();
@@ -486,6 +476,17 @@ function normalizeTranscript(entries: TranscriptEntry[], streaming: boolean): Tr
       continue;
     }
 
+    const activeCommandBlock = [...blocks].reverse().find(
+      (block): block is Extract<TranscriptBlock, { type: "tool" }> =>
+        block.type === "tool" && block.status === "running" && isCommandTool(block.name, block.input),
+    );
+    if (activeCommandBlock) {
+      activeCommandBlock.result = activeCommandBlock.result
+        ? `${activeCommandBlock.result}${activeCommandBlock.result.endsWith("\n") || entry.text.startsWith("\n") ? entry.text : `\n${entry.text}`}`
+        : entry.text;
+      continue;
+    }
+
     if (previous?.type === "stdout") {
       previous.text += previous.text.endsWith("\n") || entry.text.startsWith("\n") ? entry.text : `\n${entry.text}`;
       previous.ts = entry.ts;
@@ -519,15 +520,14 @@ function TranscriptMessageBlock({
           <span>User</span>
         </div>
       )}
-      {compact ? (
-        <div className="text-xs leading-5 text-foreground/85 whitespace-pre-wrap break-words">
-          {truncate(stripMarkdown(block.text), 360)}
-        </div>
-      ) : (
-        <MarkdownBody className="text-sm [&>*:first-child]:mt-0 [&>*:last-child]:mb-0">
-          {block.text}
-        </MarkdownBody>
-      )}
+      <MarkdownBody
+        className={cn(
+          "[&>*:first-child]:mt-0 [&>*:last-child]:mb-0",
+          compact ? "text-xs leading-5 text-foreground/85" : "text-sm",
+        )}
+      >
+        {block.text}
+      </MarkdownBody>
       {block.streaming && (
         <div className="mt-2 inline-flex items-center gap-1 text-[10px] font-medium italic text-muted-foreground">
           <span className="relative flex h-1.5 w-1.5">
@@ -549,14 +549,14 @@ function TranscriptThinkingBlock({
   density: TranscriptDensity;
 }) {
   return (
-    <div
+    <MarkdownBody
       className={cn(
-        "whitespace-pre-wrap break-words italic text-foreground/70",
+        "italic text-foreground/70 [&>*:first-child]:mt-0 [&>*:last-child]:mb-0",
         density === "compact" ? "text-[11px] leading-5" : "text-sm leading-6",
       )}
     >
       {block.text}
-    </div>
+    </MarkdownBody>
   );
 }