How to avoid hostility during brawl in Markarth?

Solution 1:

Thanks for all the help, but it was something totally different. I answer my own question because without knowing about my current equipment this is impossible to answer.

I forgot that I was wearing the ebony mail from a previous quest that had an enchantment that inflicts poison damage to nearby opponents. This triggered the hostility from the guards. Removing the ebony mail solved the problem and I could end the fist fight victorious.

Solution 2:

Didn't happen to me, but here is what I would try doing to avoid this:

• Yield in front of the guards - draw your weapon then sheath it.
• Try getting out at night when there are fewer guards.
• Try luring him to place where the guards won't see you (you might take some hits, but you should survive)
• If all the above fails, cast Calm spell on the guards. (Or Harmony if you're high level)

Solution 3:

To avoid the 'Ebony Mail' brawl bug, install the Unofficial Skyrim Patch:

The poison cloak enchantment on the Ebony Mail will no longer cause unintended damage during brawls.

Full changelog

To avoid bugs and other unwanted issues with brawling, install the Modern Brawl Bug Fix mod:

Brawls are poorly implemented in Skyrim. Any magic effects applied to either participant will cancel the brawl and may cause the opponent to pull out their weapon. Depending on your load order, you may experience the infamous "Brawl Bug" that prevents you from completing any brawls.

The Modern Brawl Bug Fix updates [brawl-related] scripts. In the vanilla game, brawls (and certain other controlled combat scenarios) are cancelled when either participant is struck by a magic effect. This mod updates these events to trigger only when a participant is struck by a weapon (except fists), hostile spell, shout or scroll or when the player casts a spell, uses an ingredient or uses a potion during the brawl.