This usually happens when the default terminal profile in VS Code is set to null or restricted.

It is explained step-by-step in this short YouTube video here: https://youtu.be/Bh7w9vTVRko

Fix:

1. Open VS Code Settings (Ctrl + ,)

2. Search for terminal.integrated.defaultProfile.windows

3. Choose a terminal like Command Prompt or PowerShell

4. Restart VS Code

That should solve it!