diff --git a/src/api/index.js b/src/api/index.js
index 7ac42e9..613960d 100644
--- a/src/api/index.js
+++ b/src/api/index.js
@@ -8,6 +8,7 @@ import { loggerMiddleware } from './middleware/logger.js';
 import env from '../config/env.js';
 import { authMiddleware } from './middleware/auth.js';
 import { ensureConnection } from '../db/store.js';
+import { closeAll as closeAllSse } from './sse.js';
 
 const __filename = fileURLToPath(import.meta.url);
 const __dirname = path.dirname(__filename);
@@ -133,8 +134,12 @@ export async function startApi() {
 
 export async function stopApi() {
     if (!server) return;
+    // Long-lived SSE (and keep-alive) sockets otherwise block server.close()
+    // forever — node --watch hangs on "Waiting for graceful termination...".
+    closeAllSse();
     await new Promise((resolve, reject) => {
         server.close((err) => (err ? reject(err) : resolve()));
+        server.closeAllConnections();
     });
     server = undefined;
 }
diff --git a/src/api/sse.js b/src/api/sse.js
index 1c01999..f6fdb9f 100644
--- a/src/api/sse.js
+++ b/src/api/sse.js
@@ -3,7 +3,7 @@
  * after a successful mutation so other tabs/users can refetch.
  */
 
-/** @typedef {{ res: import('express').Response, companyId: number, userId: number }} SseClient */
+/** @typedef {{ res: import('express').Response, companyId: number, userId: number, keepAlive: NodeJS.Timeout }} SseClient */
 
 /** @type {Set<SseClient>} */
 const clients = new Set();
@@ -18,16 +18,19 @@ const KEEP_ALIVE_MS = 25_000;
  */
 export function subscribe(res, { companyId, userId }) {
     /** @type {SseClient} */
-    const client = { res, companyId, userId };
+    const client = {
+        res,
+        companyId,
+        userId,
+        keepAlive: setInterval(() => {
+            if (res.writableEnded) return;
+            res.write(': keepalive\n\n');
+        }, KEEP_ALIVE_MS),
+    };
     clients.add(client);
 
-    const keepAlive = setInterval(() => {
-        if (res.writableEnded) return;
-        res.write(': keepalive\n\n');
-    }, KEEP_ALIVE_MS);
-
     const unsubscribe = () => {
-        clearInterval(keepAlive);
+        clearInterval(client.keepAlive);
         clients.delete(client);
     };
 
@@ -35,6 +38,20 @@ export function subscribe(res, { companyId, userId }) {
     return unsubscribe;
 }
 
+/**
+ * End every open SSE stream so `server.close()` can finish (e.g. node --watch).
+ * EventSource clients reconnect to the new process.
+ */
+export function closeAll() {
+    for (const client of [...clients]) {
+        clearInterval(client.keepAlive);
+        clients.delete(client);
+        if (!client.res.writableEnded) {
+            client.res.end();
+        }
+    }
+}
+
 /**
  * Broadcast a named signal to subscribers of the given company.
  * @param {string} signal - SSE event name (e.g. `category`)