Encountered a bug I didn't see referenced anywhere online.

Started a new game. I knew that the fire was occurring and had a rain scroll from the tutorial dungeon. Stood on the beach before talking to the cat wizard and cast the spell, putting out the fire and getting the exp.

When I walked around to the dock after talking to catwiz the NPCs were still trying to douse the fire and shouting for help despite the boat being fine. Examining the boat showed no fire status. The NPCs could not be interacted with.

Fixed by loading previous save and waiting until after talking to catwiz to walk around the dock, witness the fire, and then put it out. The NPCs then behaved normally.