Final answer:
Using the given clues, it is implied that the owl witnesses a fierce battle against a mighty storm, which leads to the ship's destruction and not any other listed scenarios.
Step-by-step explanation:
In addressing the question of what the owl witnesses when the pirates are attacked in Morocco, based on the information provided, it appears that the scenario involves a mighty storm. The ship did not reach its destination, and wreckage with the initials L.S. was observed by other sailors, suggesting that the ship encountered a disaster at sea. This aligns with Dr. Watson's implication that the ship met its demise due to the storm. Hence, the owl would have witnessed a fierce battle against nature's elements, rather than a sea monster, meteor shower, or peaceful negotiation.
The passage does not provide any information about pirates or Morocco. Therefore, based on the given information, we cannot determine what the owl witnesses.