Self contained version that should fully work for generating Markdown links via Service Station [REQUIRES Python3 from Homebrew!]

obsidian_link2.sh

#!/usr/bin/env bash

###############################################
### requires python3 installed via Homebrew ###
###############################################

unset TARGETED_URL
MENU_KIND=-1
SELECTED_ITEM_URLS=()

_pfx() {
  case $(arch) in
    arm64) echo '/opt/homebrew';;
    *) echo '/usr/local';;
  esac
}
py3=$(_pfx)/bin/python3

_realpath() {
  $py3 -c 'import sys,os; print(os.path.realpath(sys.argv[1]));' "$1"
}

_urlenc() {
  $py3 -c 'import sys; from urllib.parse import quote,unquote; print(quote(unquote(sys.argv[1])));' "$1"
}

_canonicalize() {
  unset canonical
  if [[ $1 =~ ^(/System/Volumes/Data)(/.*)$ ]]; then
    canonical="${BASH_REMATCH[2]}"
  fi
  if [[ -n $canonical ]]; then
    inode1=$(stat -f'%i' "$1")
    inode2=$(stat -f'%i' "$canonical")
    if [[ $inode1 -eq $inode2 ]]; then
      fullpath="$canonical"
    fi
  fi
}

_markdown() {
  fullpath=$(_realpath "$1")
  _canonicalize "$fullpath"
  filename="${fullpath##*/}"
  safe=$(_urlenc "${fullpath}")
  ext=$(tr '[:upper:]' '[:lower:]' <<<"${filename##*.}")
  case $ext in
    gif|jpg|jpeg|png)
      name="${filename%.*}"
      echo "![$name](file://$safe)"
      ;;
    *)
      echo "[$filename](file://$safe)"
      ;;
  esac
}

IFS=''
while [[ $# -gt 0 ]]; do
  case $1 in
    -targetedURL)
      TARGETED_URL=$2;
      shift 2
      ;;
    -menuKind)
      MENU_KIND=$2;
      shift 2
      ;;
    -selectedItemURLs)
      shift
      ;;
    *)
      SELECTED_ITEM_URLS+=("$1")
      shift
      ;;
    esac
done

if [[ "${#SELECTED_ITEM_URLS}" -gt 0 ]]; then
  for f in "${SELECTED_ITEM_URLS[@]}"; do
    _markdown "$f"
  done | pbcopy
fi

No problem. I don't mind trying to help. But, it's very strange. Yes the script seems to be working. So I would really focus on your Privacy & Security settings.

Maybe Service Station lost it's grant for Full Disk Access. I have definitely experienced a bug on macOS where even though the app is listed in FDA, something is broken underneath the surface. Usually removing the app and then re-adding it corrects this (if that is indeed your issue)