Intervention effects should use Chebyshev distance to determine the closest marker
When Morrowind picks the closest marker object for Intervention effects and jail, it picks one based on a spiral of concentric square rings, starting from the south west corner and going counter-clockwise with the grid size increasing each time it's reached again. This effectively results in Chebyshev distance being used, with the nuance that priority of markers that belong to the same square ring is determined based on how early the marker would be found in the path.
OpenMW currently uses Euclidean distance, which gives more logical, but very different results -- a headache for province mod designers when they have to pick an appropriate location for Intervention markers.
Some of the community-generated maps for illustrative purposes.
Now that we know the algorithm it should be possible to emulate it accurately.