Observe flood surrounding City close to Monument (8)
I believe the answer is:
spectate
'observe' is the definition.
(I've seen this before)
'flood surrounding city close to monument' is the wordplay.
'flood' becomes 'spate' (synonyms).
'surrounding' is an insertion indicator.
'city' becomes 'EC' (the City of London postcode).
'close to' says to take the final letters (the 'close' to the word).
The final letter of 'monument' is 't'.
'ec'+'t'='ect'
'spate' enclosing 'ect' is 'SPECTATE'.
(Other definitions for spectate that I've seen before include "Be an onlooker" , "Observe" , "Watch (a game, etc)" , "Look on (at a match)" , "View" .)