Overwatch’s headquarters was destroyed in Switzerland. In the backstory, a massive explosion devastated the organization’s Swiss base during a confrontation between its two most powerful commanders, Jack Morrison and Gabriel Reyes.
Morrison led Overwatch, while Reyes commanded Blackwatch, the organization’s secretive covert-operations branch. Relations between the former comrades deteriorated after Blackwatch’s activities became public and the United Nations began investigating Overwatch. Their dispute culminated in a fight at headquarters.
The explosion was publicly described as an accident, and Morrison and Reyes were presumed dead. Later lore revealed that both survived in altered forms: Morrison became the vigilante Soldier: 76, while Reyes became the masked mercenary Reaper. Their conflict therefore shaped both the fall of Overwatch and two of the franchise’s central characters.
Switzerland is the country-level answer; the headquarters is commonly identified more specifically with Zurich. The blast was not the legal act that dissolved Overwatch. The subsequent Petras Act formally outlawed further activity by the organization.