Indeed.. Resdayn/Morrowind are pretty isolationistic. Sure, they raid into Argonia and take slaves, but they never actually invade that much. Giving them a free Holy War CB would be very odd.
Id reserve Holy War CBs for against Heretics
Heresy being an open defiance or rebellion against the establishment and so making sense as something you could get away with attacking without just cause. And by Heretics as theyre seeking the overthrow and so dont care about the opinions or rules of those they are against.
That way theres no balance issue too.