If you put someone in a fight vs. flight situation, and add in the task saturation of the coding interview, a competent person can react adversely and make basic mistakes. A week ago in a conference, I watched an SRE who I knew was very competent have a panic attack when a demo didn't work as expected. I never learned what exactly happened, but apparently it was simple enough that a colleague was able to quickly fix the problem over their shoulder.

Unless you're giving public demos/performances (which is what an interview is), this skill set isn't nearly the most relevant one for the job.

EDIT: This is a fascinating analysis of this phenomenon from a pilot's perspective: https://youtu.be/BBpqvPujZgM?t=1135

The video is the post-mortem of a plane crash at an air show with the pilot involved. In the part I linked to, he talks about the psychology of a skilled person when put under this kind of pressure and how the quality of their decision making can quickly break down. The whole video is also great if you're interested in aviation.