The most common and most likely answer to this crossword clue is the 8 letter word SPECTATE
I've seen this crossword clue in The Guardian
S
P
E
C
T
A
T
E
More clues leading to the result SPECTATE
- Watch muscle is in condition
- Watch government bringing in muscle
- Watch muscle, getting into condition
- Watch flood outside European court
- Watch muscle gets into condition
- Watch police state collapse after oil disappears
- Observe sudden rush to receive shock treatment
- Watch people welcoming policeman full of energy
- Look on as muscle gets brought into condition
- Attend match, say, in which muscle is evident
Buddy explains!

The straight part
We know that "Observe" is the straight/definition part of the clue. The straight part is often a synonym or definition, in this case observe = spectate.The cryptic/wordplay part
In cryptic crossword there's often an wordplay/cryptic part as well.This part involves a more complex hint, such as an anagram, homophone, hidden word, etc.
Sadly, We don't have an explanation for this specific crossword clue yet.
What does SPECTATE mean?
SPECTATE verb- To attend an event as a spectator; to observe.