Any kind of military development would deepen and lengthen the wide selloff that sent the Dow Jones industrial average more than 200 points lower Monday morning, O'Neill said. The question remains whether the Russian military wants an excuse to escalate the standoff to outright hostility, said Richard Haass, president of the Council on Foreign Relations.
"Odds are that at some point some individuals are going to take some shots at Russian troops," Haass told CNBC on "Squawk on the Street."
Veteran trader Art Cashin, UBS' director of floor operation at the NYSE, told CNBC that fighting of a different sort has already begun—on currency exchanges.
(Read more: Cramer sees buying opportunities in Ukraine upheaval)
"While we've all been looking at troop movements and what not, the real battle is in things like currencies," Cashin said on "Squawk on the Street."
"The ruble has plunged. They've had to consider raising rates over there. [That] can't make Mr. Putin too comfortable. There is no quick and easy diplomatic solution to this. There's going to be a little bit of lagging and nagging concern."
Peter Boockvar, a CNBC contributor and managing director at The Lindsey Group, said on Monday that the market's drastic reaction to the Ukraine-Russia tensions stemmed from the potential ripple effects from Russia's status as a huge energy exporter to Europe.
"If Russia has a problem, Europe has a problem," Boockvar said. "If Europe has a problem, it's going to impact the rest of the world because obviously Europe is such a huge economic trading partner."
Traders have a short attention span, however. Calling Monday's selloff on Wall Street a "knee-jerk geopolitical mess," Boockvar said he wouldn't be surprised if by week's end investors are more concerned with U.S. employment data released on Friday.
—By CNBC's Jeff Morganteen. Follow him on Twitter at @jmorganteen and get the latest stories from "Squawk on the Street." Reuters contributed to this report.