So this started happening all of a sudden? I can't seem to figure out how I might've enabled this nor how to disable it? I've tried ctrl+esc and all that with 0 results. I've also looked into the settings for highlights, code blocks and indents with no luck. Anyone out there know how to remove this setting from VS Code?
Thanks!

Put this line in your settings.json file:
“sqltools.highlightQuery”: false
Save the file and go back to your SQL file. The highlighting should now be gone.
I also had this same setting or configuration happen to me out of no where after doing some visual studio code updates. I also found that this blue block highlighting only seem to occur on SQL like syntax. So I looked through my extensions and I only had 2 related to SQL syntax. I disabled the "SQLTools" extension I had installed and the blue blocks went away:

This extensions official site can be found here:
https://vscode-sqltools.mteixeira.dev/
I haven't looked but may there is a way to disable this setting.
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