I'll playtest with it this weekend and send a bug report. I don't think Larian intended to have Fog Cloud to prevent initiative.
I don't think that was the intention either, but the way it works is that when an enemy is hit with an attack they make a contested check against your stealth, if you are successful combat is not initiated. Because of fog cloud, they auto fail due to you being in a heavily obscured area which means combat can not initiate until you leave the cloud or end the spell.
The only fix to this is to make every hit no matter what trigger initiative, but with the way the game is built, I doubt they will put that into practice.
