Does anyone facing an error when run suitecloud account:setup. After click Continue

It seems to work fine in VS Code. What context are you running that in? How did you get that screen?

I tested both. SuiteCloud CLI and VS Code extension as well. It shows this screen and go back to that 127.0.0.1 after I hit Continue

Are you using a dev container by any chance? I've had issues with port forwarding on services that only listen on 127.0.0.1 from within the container.