I finally solved it!
I had the same error code as you.
Running Databricks Extension v1.1.1, vscode 1.79 on Windows 10.

I'm behind a company proxy and the main issue was that vscode didn't have proxy support enabled as default.
Adding this to my settings.json file in vscode:

"http.proxySupport":"on",
"http.proxy": "http://<company-webproxy>:<port>",

I got inspired from here:
https://gist.github.com/PSJoshi/0831f635f9f5a7b9c602b80fbbf3125a#setting-up-proxy-support

I hope this helps!