More terrorist attacks in Paris could derail global financial markets, Art Cashin, director of floor operations for UBS at the NYSE, said Tuesday.

"If they come back in Paris … you would see the market react very, very strongly," Cashin told CNBC's " Squawk Alley ." "It would show a French vulnerability that people are not assuming quite yet, and that would be potentially horrific for the market."

Geopolitical tensions have risen sharply ever since the so-called Islamic State carried out a series of coordinated attacks in Paris, which left scores dead and hundreds more injured. On Tuesday, tensions increased further after the Turkish military downed a Russian fighter jet.

Russian President Vladimir Putin said the attack is a "stab in the back" and said it would have serious consequences for the Turkish-Russian relationship.

Still, U.S. equities managed to pare earlier losses in afternoon trading.

"It's an unfolding story, and people can't figure out exactly what's going to build into it. You had a few words out of Putin; let's see how really angry he becomes, how do the other players break out in this case, and what continues to happen," Cashin said.

"The story for this year has been about uncertainty. That's been uncertainty about the Fed, uncertainty about China and geopolitical risk. I think the story today is that geopolitical risk has been something with us for the last 15 years. Whether it's Crimea, or Afghanistan, or Iraq, and the most important thing over the last 15 years has been to focus on the economy … and not get out because there is uncertainty in the world," James Liu, global market strategist at JPMorgan Funds, told CNBC's " Squawk on the Street " on Tuesday.

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