Well I hope that what you say is true and that the failure to react would be equivalent to disbanding NATO, but at the same time would western EU and US really enter world war III just because of eastern parts of Estonia?
And I'm not just speculating here. This is Reuters news of comments by Russian officials today:
http://www.reuters.com/article/2014/03/19/us-russia-estonia-idUSBREA2I1J620140319
In any case this thread is getting political and is hard to say what the impact will be on markets. Right now the annexation of Crimea happened relatively smoothly for Russia. This might embolden them though I too hope that NATO members are a bit too big a bite for them, then again nibbling on the edge might not be especially if they play the sympathy and helping card yet again. I think the true impact to markets is more longterm. Hopefully EU members will understand that any kind of dependents on Russian goods (i.e. natural gas) is bad and will start to move off this dependence over time. However that's not going to happen overnight and it will cause issues. As a simple example, my house is warmed by natural gas heater. While I've heard that there are reserves for ~3 years I doubt it's that easy. Russia right now isn't pushing things too agressively and we're not seeing a full scale military invasion so the markets are reacting smoothly, but things aren't looking too bright for nearer term here in the region where our borders touch Russia