How do I use cmd+1 as a keyboard shortcut? cmd+2, cmd+3, etc, work
The problem is that iterm2 uses cmd+1, cmd+2 ... etc for switching between tabs by default. As long as you have first tab, cmd+1 is binded to switch to the this tab.

Workaround is to change Keys -> Navigation shortcuts -> To switch tabs: value to alt or any other except cmd.