In GTA there aren't wooden buildings, in Oblivion there are.
Magical crossfire could result in a Kvatch 2.0.
...unless there's an invincible firefighting squad.
Just throwing a fire into a wooden building won't result in a burning city. As i wrote, massive wood needs a high temperature to even ignite, and a fire's temperature cannot be higher than it's source. You'd need a very good fire spell to ignite a large wooden structure. Furniture and straw roofs can be ignited more easily. And even then wouldn't the fire spread all over the town, it always cools down by itself. Besides, NPCs should be smart enough to react to fires .
Though causing widespread devastation is basically the whole point of it.