Terminal Quit menu item greyed out

I ran various commands in Terminal app, including calls to "open" from Midnight Commander (although, that might be completely unrelated) and suddenly it started to behave strangely. The cursor was gone, I could type commands but could not see them on the screen. I tried typing "reset" but that did not help.

Trying to open a new Terminal was not possible (CMD+W or CMD+T not working and menu items greyed out). I decided to close it and reopen, but the Quit menu item is also greyed out.

Does anyone know what are conditions that disabled Quit?