He's watching the fight in a somewhat frozen way, not knowing what the hell he should do about it. It's one thing to pull apart, say, fighting coworkers or soldiers, but this is Ianto and John. He doesn't want to let John get away with picking a fight, and doesn't want Ianto to think that Jack won't let him handle things himself, and just... no good options seem to be coming up.
Right, well, maybe can't physically separate them, but he can at least yell, "HEY!"