Set the iTerm tab title to the current directory, not full path.

current-dir-in-iterm-tab-title.sh

# put this in your .bash_profile
if [ $ITERM_SESSION_ID ]; then
  export PROMPT_COMMAND='echo -ne "\033];${PWD##*/}\007"; ':"$PROMPT_COMMAND";
fi

###########################

# ~/.zshrc
precmd() {
  # sets the tab title to current dir
  echo -ne "\e]1;${PWD##*/}\a"
}