I ran into this frustrating roadblock today. As this post was one of the first search results I found I'm posting my solution here.
/*Portfolio Overlay Grid*/
.portfolio-text:hover {
opacity: 1 !important;
background-color: rgba(255, 255, 255, 0.7);
}
This has worked for me to get the hover overlay effect on mobile and tablets. The background overly is 70% white, you can edit as you like.
I've ended up setting this from desktop screen size down to make sure it also works on iPad Pro's (I don't have one to check).
I hope this is helpful for someone.
Really disappointed that Squarespace doesn't have this sorted yet.