[BUG] `docker compose up --build` fails when `.env` is a directory despite specifying `env_file`

[theoratkin]

Description

Starting with 2.37.0, running the command docker compose up --build in projects with an .env directory fails with the following output:

> docker compose up --build
[+] Building 0.0s (1/1) FINISHED                                                      
 => [internal] load local bake definitions                                       0.0s
 => => reading from stdin 382B                                                   0.0s
read /home/theor/tmp/docker-build-env-dir/.env: is a directory

Even though env_file is explicitly specified in docker-compose.yml:

services:
  test:
    build:
      context: .
      dockerfile: ./Dockerfile
    env_file:
      - .env/example

Using the --env-file option makes no difference:

> docker compose --env-file .env/example up --build
[+] Building 0.0s (1/1) FINISHED                                                      
 => [internal] load local bake definitions                                       0.0s
 => => reading from stdin 382B                                                   0.0s
read /home/theor/tmp/docker-build-env-dir/.env: is a directory

This is a regression from 2.36.2, which didn't have this issue.

Steps To Reproduce

1. Make sure you are running at least docker compose 2.37.0.
2. Download minimal reproducible example: docker-build-env-dir-mre.zip.
3. Unzip and cd to it.
4. Run docker compose up --build

Compose Version

> docker compose version
Docker Compose version 2.37.1
> docker-compose version
Docker Compose version 2.37.1

Docker Environment

> docker info
Client:
 Version:    28.2.2
 Context:    default
 Debug Mode: false
 Plugins:
  buildx: Docker Buildx (Docker Inc.)
    Version:  0.24.0
    Path:     /usr/lib/docker/cli-plugins/docker-buildx
  compose: Docker Compose (Docker Inc.)
    Version:  2.37.1
    Path:     /usr/lib/docker/cli-plugins/docker-compose

Server:
 Containers: 10
  Running: 8
  Paused: 0
  Stopped: 2
 Images: 773
 Server Version: 28.2.2
 Storage Driver: overlay2
  Backing Filesystem: extfs
  Supports d_type: true
  Using metacopy: false
  Native Overlay Diff: true
  userxattr: true
 Logging Driver: json-file
 Cgroup Driver: systemd
 Cgroup Version: 2
 Plugins:
  Volume: local
  Network: bridge host ipvlan macvlan null overlay
  Log: awslogs fluentd gcplogs gelf journald json-file local splunk syslog
 CDI spec directories:
  /etc/cdi
  /var/run/cdi
 Swarm: inactive
 Runtimes: io.containerd.runc.v2 runc
 Default Runtime: runc
 Init Binary: docker-init
 containerd version: 64ed272067a24c2d917064eea25a78e1479d632f.m
 runc version: 
 init version: de40ad0
 Security Options:
  seccomp
   Profile: builtin
  rootless
  cgroupns
 Kernel Version: 6.15.2-arch1-1
 Operating System: Arch Linux
 OSType: linux
 Architecture: x86_64
 CPUs: 12
 Total Memory: 62.59GiB
 Name: theost
 ID: 0c2346f7-0c51-4d23-8ce3-0eddc5dd56b3
 Docker Root Dir: /home/theor/.local/share/docker
 Debug Mode: false
 Experimental: false
 Insecure Registries:
  ::1/128
  127.0.0.0/8
 Live Restore Enabled: false

WARNING: No cpuset support
WARNING: No io.weight support
WARNING: No io.weight (per device) support
WARNING: No io.max (rbps) support
WARNING: No io.max (wbps) support
WARNING: No io.max (riops) support
WARNING: No io.max (wiops) support

Anything else?

This might be related to #10430, but in that instance it was failing regardless of using --build, and --env-file could be specified as a workaround.

[ndeloof]

this is indeed #10430
env_file is not the same as --env-file set on command (this is highly confusing, but that's our legacy)

[ndeloof]

issue actually applies to Bake, which is used by Compose v2.37 as the default builder.
Can you please confirm by running:

$ docker buildx bake -f compose.yaml
[+] Building 0.0s (1/1) FINISHED                           docker:desktop-linux
 => [internal] load local bake definitions                                 0.0s
 => => reading compose.yaml 156B / 156B                                    0.0s
ERROR: read /tmp/.env: is a directory

cc @crazy-max

[theoratkin]

Thanks for the clarification @ndeloof! I can confirm that docker buildx bake -f docker-compose.yml produces the same error in the example project:

docker buildx bake -f docker-compose.yml
[+] Building 0.0s (1/1) FINISHED                                       docker:default
 => [internal] load local bake definitions                                       0.0s
 => => reading docker-compose.yml 112B / 112B                                    0.0s
ERROR: read /home/theor/tmp/docker-build-env-dir-mre/.env: is a directory