Ktor 3 client auto-instrumentation does not propagate trace context when used inside Ktor server

[ssmtlbn-ehex]

Describe the bug

When using the OpenTelemetry Java Agent with a Ktor 3 application, outgoing requests made via HttpClient inside a Ktor server handler do not propagate the trace context.

• Context.current() and Span.current() are valid inside the server handler
• However, the outgoing Ktor client request does not include a traceparent header
• No CLIENT span is created for the outgoing request

The Ktor client instrumentation module is applied according to debug logs.

Steps to reproduce

Minimal JUnit test:

@Test
fun `ktor client inside ktor server does send traceparent`() = testApplication {
    var receivedTraceparent: String? = null

    val stubPort = 9090
    val stubServer = embeddedServer(CIO, port = stubPort) {
        routing {
            get("/tracing-test") {
                receivedTraceparent = call.request.headers["traceparent"]
                call.respond(HttpStatusCode.OK)
            }
        }
    }.start(wait = false)

    val outboundClient = HttpClient(CIO)

    try {
        application {
            routing {
                get("/trigger") {
                    val currentSpan = Span.current()
                    val traceparent = Context.current()

                    println("Current span valid: ${currentSpan.spanContext.isValid}")
                    println("Current traceId: ${currentSpan.spanContext.traceId}")
                    println("Current traceparent: $traceparent")

                    outboundClient.get("http://localhost:$stubPort/tracing-test")

                    call.respond(HttpStatusCode.OK)
                }
            }
        }

        val testClient = createClient {}

        testClient.get("/trigger")

        println("Received traceparent: $receivedTraceparent")

        assertNotNull(receivedTraceparent, "traceparent should be propagated")
    } finally {
        outboundClient.close()
        stubServer.stop(1_000, 2_000)
    }
}

Expected behavior

• A CLIENT span should be created for the outgoing Ktor request
• The traceparent header should be injected automatically

Actual behavior

• No CLIENT span is created
• No traceparent header is sent

Javaagent or library instrumentation version

2.26.1, 2.27.0

Environment

JDK: 21
Kotlin: 2.3.21
Ktor: 3.4.3

Additional context

No response

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[laurit]

If I understand correctly the issue here is that the first http client is some sort of testing client that doesn't make an actual http call but rather calls the endpoint method directly. The side effect of that is that the context also propagates directly not through the headers. Since the context already has an http call in progress the http client instrumentation is suppressed for outboundClient.get("http://localhost:$stubPort/tracing-test"). Resetting the context with

withContext(Context.root().with(Span.wrap(currentSpan.spanContext)).asContextElement()) {
    outboundClient.get("http://localhost:$stubPort/tracing-test")
}

seems to help.

[ssmtlbn-ehex]

You are right. Seems to be just an issue with the testApplication. I've created the same test as above but with just real servers and clients and it worked like expected.
Not sure if you want to keep the issue to fix / change that. If not, issue can be closed.