diff --git a/run_agent.py b/run_agent.py
index fb03ee5c4f..2dcfcd682b 100644
--- a/run_agent.py
+++ b/run_agent.py
@@ -3824,10 +3824,8 @@ class AIAgent:
                         )
 
                         if _is_timeout or _is_conn_err:
-                            # Transient network / timeout error.  Retry the
-                            # streaming request with a fresh connection rather
-                            # than falling back to non-streaming (which would
-                            # hang for up to 15 min on the same dead server).
+                            # Transient network / timeout error. Retry the
+                            # streaming request with a fresh connection first.
                             if _stream_attempt < _max_stream_retries:
                                 logger.info(
                                     "Streaming attempt %s/%s failed (%s: %s), "
@@ -3845,30 +3843,34 @@ class AIAgent:
                                     )
                                     request_client_holder["client"] = None
                                 continue
-                            # Exhausted retries — propagate to outer loop
                             logger.warning(
-                                "Streaming exhausted %s retries on transient error: %s",
+                                "Streaming exhausted %s retries on transient error, "
+                                "falling back to non-streaming: %s",
                                 _max_stream_retries + 1,
                                 e,
                             )
-                            result["error"] = e
-                            return
-
-                        # Non-transient error (e.g. "streaming not supported",
-                        # auth error, 4xx).  Fall back to non-streaming once.
-                        err_msg = str(e).lower()
-                        if "stream" in err_msg and "not supported" in err_msg:
-                            logger.info(
-                                "Streaming not supported, falling back to non-streaming: %s", e
+                        else:
+                            _err_lower = str(e).lower()
+                            _is_stream_unsupported = (
+                                "stream" in _err_lower
+                                and "not supported" in _err_lower
+                            )
+                            if _is_stream_unsupported:
+                                self._safe_print(
+                                    "\n⚠  Streaming is not supported for this "
+                                    "model/provider. Falling back to non-streaming.\n"
+                                    "   To avoid this delay, set display.streaming: false "
+                                    "in config.yaml\n"
+                                )
+                            logger.info(
+                                "Streaming failed before delivery, falling back to non-streaming: %s",
+                                e,
                             )
-                            try:
-                                result["response"] = self._interruptible_api_call(api_kwargs)
-                            except Exception as fallback_err:
-                                result["error"] = fallback_err
-                            return
 
-                        # Unknown error — propagate to outer retry loop
-                        result["error"] = e
+                        try:
+                            result["response"] = self._interruptible_api_call(api_kwargs)
+                        except Exception as fallback_err:
+                            result["error"] = fallback_err
                         return
             finally:
                 request_client = request_client_holder.get("client")
diff --git a/tests/test_streaming.py b/tests/test_streaming.py
index 9d3ed6f320..88e3aa9e87 100644
--- a/tests/test_streaming.py
+++ b/tests/test_streaming.py
@@ -487,6 +487,51 @@ class TestStreamingFallback:
         with pytest.raises(Exception, match="Rate limit exceeded"):
             agent._interruptible_streaming_api_call({})
 
+    @patch("run_agent.AIAgent._interruptible_api_call")
+    @patch("run_agent.AIAgent._create_request_openai_client")
+    @patch("run_agent.AIAgent._close_request_openai_client")
+    def test_exhausted_transient_stream_error_falls_back(self, mock_close, mock_create, mock_non_stream):
+        """Transient stream errors retry first, then fall back after retries are exhausted."""
+        from run_agent import AIAgent
+        import httpx
+
+        mock_client = MagicMock()
+        mock_client.chat.completions.create.side_effect = httpx.ConnectError("socket closed")
+        mock_create.return_value = mock_client
+
+        fallback_response = SimpleNamespace(
+            id="fallback",
+            model="test",
+            choices=[SimpleNamespace(
+                index=0,
+                message=SimpleNamespace(
+                    role="assistant",
+                    content="fallback after retries exhausted",
+                    tool_calls=None,
+                    reasoning_content=None,
+                ),
+                finish_reason="stop",
+            )],
+            usage=None,
+        )
+        mock_non_stream.return_value = fallback_response
+
+        agent = AIAgent(
+            model="test/model",
+            quiet_mode=True,
+            skip_context_files=True,
+            skip_memory=True,
+        )
+        agent.api_mode = "chat_completions"
+        agent._interrupt_requested = False
+
+        response = agent._interruptible_streaming_api_call({})
+
+        assert response.choices[0].message.content == "fallback after retries exhausted"
+        assert mock_client.chat.completions.create.call_count == 3
+        mock_non_stream.assert_called_once()
+        assert mock_close.call_count >= 1
+
 
 # ── Test: Reasoning Streaming ────────────────────────────────────────────