This bug has been fixed in the latest release of VS Code Insiders!

@ribru17, you can help us out by commenting /verified if things are now working as expected.

If things still don't seem right, please ensure you're on version 2ed1e9b of Insiders (today's or later - you can use Help: About in the command palette to check), and leave a comment letting us know what isn't working as expected.

Happy Coding!

This looks like this is already fixed in 1.95:

Am I looking in the right place?

This is the right place, looks like it is fixed! Thanks for checking

My screen shot is from 1.95, before the fix was made.

I see. I can confirm the effect of this change soon then, I do not use VS code but rather the vtsls wrapper which is where I noticed markdown blocks were not highlighted. Perhaps the vs code client handles this special case internally already

Marking as verified on the VS Code based on looking at the rendered html in the hover

Once toy can test this with vtsls please let me know if there are any issues