The prospect of the U.S., the European Union and Russia edging ever closer to blows – diplomatic or otherwise -- over the situation in Ukraine looks increasingly real.
It is now the "biggest geopolitical risk event in some years," Tina Fordham, senior global political analyst at Citi, told CNBC.com.
Ukraine closed its airspace and warned about the safety of its nuclear assets on Sunday, while leaders in Russia, the U.S. and European Union squared up.
(Read more: Ukraine mobilizes for war)
The U.S. and U.K. promised to defend Ukraine against aggression as part of the 1994 Budapest Memorandum, as did Russia.
With Russia's parliament voting to allow military intervention over the weekend, the point at which Russia may start defending its interests in Ukraine with force seemed ever closer.
President Vladimir Putin claims to be defending the ethnic Russians in the Crimea region of Ukraine, which is on Russia's borders. He is also reacting against the deposal of a Russian-backed regime, led by Viktor Yanukovych, in Ukraine in favor of politicians dubbed "fascists" by Russian politicians.
(Read more: Watch risk on Monday, say strategists)
Donald Tusk, the Polish prime minister, said the "world stands on the brink of conflict" over Ukraine in a press conference Sunday.
"Europe must send a clear signal it will not tolerate any acts of aggression or intervention," he told reporters. Poland is one of the most economically successful post-Soviet states in Eastern Europe, and would not welcome any signs of increased Russian aggression.
A "general pullback" in equity markets around the globe is forecast if the stand-off turns into a showdown, Bill Witherell, chief global economist at Cumberland Advisors, wrote in a note.
"An East-West geopolitical rubicon is in the process of being crossed," Nicholas Spiro managing director at Spiro Sovereign Strategy, warned.
"From an emerging market standpoint, this couldn't be happening at a least opportune time."
Emerging markets are likely to see another sell-off across the board after this crisis reminded the markets of their potential risks, Spiro forecast.
(Read more: Ukraine's next big problem)
Riskier assets across the board are set for a sell-off, with strategists at Bank of BNY Mellon cautioning against risk this week.
The price of oil is likely to rise, as war in the region may make oil supplies more difficult, which should give Russia's economy a much-needed boost.
The Russian ruble, which has fallen by 3.5 percent against the dollar in the last fortnight as the crisis deepened, is likely to take a further hit. The euro may suffer too as worries about political risk rise.
Ukraine's currency, the hryvnia, is set to take a further battering, as a hoped-for rescue by the International Monetary Fund is unlikely to materialize if the country becomes a war zone.
"The perception in the markets has been that this is all brinkmanship but it's very difficult to see how you can de-escalate," Spiro said.
- By CNBC's Catherine Boyle. Twitter: @cboylecnbc.