`COMPOSE_FILE` not loaded from `.env` after last update?

I have my project located in ~/Developer/project-name/. Within the project, I have my docker-compose.yml config located in ./docker/docker-compose.yml, and I’m referencing this file from ./.env:


Previously, I was able to run docker compose commands from my project dir, and it would automatically use the docker-compose.yml from the path specified in the ./.env file. However, after the last update (Docker Desktop 4.28.0 which includes Compose v2.24.6), it no longer recognises this. Instead, docker compose commands run from my project dir now use a global file that I have under ~/Developer/. I.e., running docker compose ps from my project dir doesn’t show my projects containers, but the global ones.

When I remove ~/Developer/docker-compose.yml, it works fine again. I.e., docker compose ps shows my projects containers.

Is this expected behaviour? I see the Compose v2.24.6 release notes mention something about .env files and COMPOSE_FILE, but I’m curious if this behaviour is expected.