Clamshell mode M1 MacBook Air doesn't work

I have my M1 MacBook Air hooked up to an external monitor, Apple Mighty Mouse A1152 and Apple USB-C A1242 Keyboard via a Hyperdrive Net 6-in-2 dock.

Everything works great, the display is mirrored, but when I close the lid, the laptop goes to sleep and won't wake up from any mouse/keyboard input.

Prevent automatic sleeping when display is off is ON but toggling seems to have no impact on the actual operation of the machine.

Help!