diff --git a/cli/src/utils/__tests__/block-operations-streaming.test.ts b/cli/src/utils/__tests__/block-operations-streaming.test.ts
new file mode 100644
index 0000000000..5bec86b451
--- /dev/null
+++ b/cli/src/utils/__tests__/block-operations-streaming.test.ts
@@ -0,0 +1,130 @@
+import { describe, expect, test } from 'bun:test'
+
+import { appendTextToRootStream } from '../block-operations'
+
+import type { ContentBlock, TextContentBlock } from '../../types/chat'
+
+/**
+ * The text stream path only scans the seam between the last block and the new
+ * delta when looking for a partial think tag (see block-operations.ts), so it
+ * must still notice a tag split at any point inside the tag syntax, including
+ * the widest partial prefix it has to recognise (`</think`).
+ */
+
+const stream = (text: string, chunkSize: number): ContentBlock[] => {
+  let blocks: ContentBlock[] = []
+  for (let i = 0; i < text.length; i += chunkSize) {
+    blocks = appendTextToRootStream(blocks, {
+      type: 'text',
+      text: text.slice(i, i + chunkSize),
+    })
+  }
+  return blocks
+}
+
+const shape = (blocks: ContentBlock[]) =>
+  blocks.map((block) => {
+    const text = block as TextContentBlock
+    return {
+      type: block.type,
+      textType: text.textType,
+      content: text.content,
+      thinkingOpen: text.thinkingOpen,
+    }
+  })
+
+const textOf = (blocks: ContentBlock[]) =>
+  blocks.map((block) => (block as TextContentBlock).content ?? '').join('')
+
+describe('think tags split across delta boundaries', () => {
+  test('opening tag split across two deltas opens a thinking block', () => {
+    const first = appendTextToRootStream(
+      [{ type: 'text', content: 'a', textType: 'text' }],
+      { type: 'text', text: ' <thi' },
+    )
+    const second = appendTextToRootStream(first, { type: 'text', text: 'nk>b' })
+
+    expect(shape(second)).toEqual([
+      { type: 'text', textType: 'text', content: 'a ', thinkingOpen: undefined },
+      { type: 'text', textType: 'reasoning', content: 'b', thinkingOpen: true },
+    ])
+  })
+
+  test('closing tag split across two deltas closes the thinking block', () => {
+    const first = appendTextToRootStream([], {
+      type: 'text',
+      text: '<think>a</thi',
+    })
+    const second = appendTextToRootStream(first, { type: 'text', text: 'nk> b' })
+
+    expect(shape(second)).toEqual([
+      { type: 'text', textType: 'reasoning', content: 'a', thinkingOpen: false },
+      { type: 'text', textType: 'text', content: ' b', thinkingOpen: undefined },
+    ])
+  })
+
+  test('an empty think pair produces no blocks, however it is chunked', () => {
+    for (const chunkSize of [1, 2, 7, 8, 100]) {
+      expect(stream('<think></think>', chunkSize)).toEqual([])
+    }
+  })
+
+  test('the widest partial close prefix is still recognised', () => {
+    // `</think` is exactly the seam width; the `>` arrives on its own.
+    const first = appendTextToRootStream([], {
+      type: 'text',
+      text: '<think>thought</think',
+    })
+    const second = appendTextToRootStream(first, { type: 'text', text: '>' })
+
+    expect(shape(second)).toEqual([
+      {
+        type: 'text',
+        textType: 'reasoning',
+        content: 'thought',
+        thinkingOpen: false,
+      },
+    ])
+  })
+
+  test('ordinary less-than at the end of a delta is kept as text', () => {
+    const first = appendTextToRootStream([], { type: 'text', text: 'a <' })
+    const second = appendTextToRootStream(first, { type: 'text', text: ' b' })
+
+    expect(shape(second)).toEqual([
+      {
+        type: 'text',
+        textType: 'text',
+        content: 'a < b',
+        thinkingOpen: undefined,
+      },
+    ])
+  })
+})
+
+describe('long streams stay a single block', () => {
+  test('5000 characters without tags accumulate into one block', () => {
+    const text = 'abcdefghij'.repeat(500)
+    const blocks = stream(text, 7)
+
+    expect(blocks).toHaveLength(1)
+    expect((blocks[0] as TextContentBlock).content).toBe(text)
+  })
+
+  test('a tag completed after a long prefix is still split out', () => {
+    const prefix = 'x'.repeat(10_000)
+    const blocks = stream(`${prefix}<think>thought</think>tail`, 64)
+
+    // The prefix must stay intact and keep its length: no truncation at the seam.
+    expect(textOf(blocks)).toBe(`${prefix}thoughttail`)
+    expect(blocks.some((b) => (b as TextContentBlock).textType === 'reasoning'))
+      .toBe(true)
+  })
+
+  test('a large block with a less-than keeps every character', () => {
+    const text = `${'y'.repeat(10_000)} < not a tag`
+    const blocks = stream(text, 33)
+
+    expect(textOf(blocks)).toBe(text)
+  })
+})
diff --git a/cli/src/utils/block-operations.ts b/cli/src/utils/block-operations.ts
index 86396507ac..789dc42220 100644
--- a/cli/src/utils/block-operations.ts
+++ b/cli/src/utils/block-operations.ts
@@ -170,14 +170,27 @@ const appendTextWithThinkParsingToBlocks = (
     lastBlock?.type === 'text' &&
     lastBlock.textType === 'text'
   ) {
-    const combinedText = lastBlock.content + text
+    // A think tag can only be *completed* by this delta, at the seam between
+    // the block's tail and `text`; a tag already sitting inside the block was
+    // split out when it arrived. So scan the seam first and only fall back to
+    // the whole block when a '<' could still be mid-tag. Concatenating and
+    // scanning the full block per delta made this O(block) per chunk, i.e.
+    // quadratic over a long reply: a 470KB stream spent ~430ms here.
+    const seamLength = Math.max(THINK_OPEN_TAG.length, THINK_CLOSE_TAG.length) - 1
+    const seam = lastBlock.content.slice(
+      Math.max(0, lastBlock.content.length - seamLength),
+    )
 
-    if (
-      combinedText.includes(THINK_OPEN_TAG) ||
-      combinedText.includes(THINK_CLOSE_TAG)
-    ) {
-      textToParse = combinedText
-      nextBlocks.pop()
+    if (seam.includes('<') || text.includes('<')) {
+      const combinedText = lastBlock.content + text
+
+      if (
+        combinedText.includes(THINK_OPEN_TAG) ||
+        combinedText.includes(THINK_CLOSE_TAG)
+      ) {
+        textToParse = combinedText
+        nextBlocks.pop()
+      }
     }
   }