Hong Kong stocks finished higher Monday as investors remained cautiously optimistic over the prospect of a diplomatic breakthrough between Iran and the U.S.

The Hang Seng Index rose by 200.74 points, or roughly 0.8%, to end at 26,361.07, while the Hang Seng China Enterprises Index increased by 54.04 points, or around 0.6%, to close at 8,899.06.

Tensions brewed after a US Navy destroyer, USS Spruance, intercepted an Iranian-flagged cargo vessel called Touska near the Strait of Hormuz and Iran issued a warning to the US.

Despite an announcement from Iran that it had again closed the strait, 20 ships had transited from the narrow passage on Saturday, Reuters reported, citing Kpler data.

The ongoing conflict in the Middle East is helping Hong Kong reassert itself as a haven in global finance, thanks to its geographical location and support from China's economic strength, the South China Morning Post said in a report.

According to the paper, banks had turned to the city to protect their business, while global investors had inquired about adding allocations of mainland Chinese assets to their portfolio.

In corporate news, two mainland Chinese firms filed to go public in Hong Kong.

Shanghai Xizhi Technology (HKG:1879) is looking to raise up to HK$2.53 billion via the sale of 13.8 million shares at a maximum price of HK$183.20 each. The optoelectronic computing company will use the proceeds to advance research and development.

Meanwhile, Mabwell (Shanghai) Bioscience (HKG:2493, SHA:688062) is seeking about HK$1.45 billion via the sale of 47.1 million H-shares for up to HK$30.71 per share.

Net proceeds will be used primarily to advance clinical trials of the pharmaceutical company's core product, 9MW2821, across multiple indications, including urothelial carcinoma, triple-negative breast cancer, and cervical cancer.