After deleting build folders present in the project folder and in project/app/ folder when I tried to open a new session in local Terminal (by pressing "+"), following error appeared:

What is the possible cause?
Android Studio version: 3.1.2
Operating System: MacOS Sierra
Experienced the same issue though i have no idea what caused it.
But for those who are looking for a fix:
I fixed it by invalidating caches and restarting Android Studio.
Go to File -> Invalidate Caches/Restart.
This should sort the issue.
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