Team Sprint Commitment - what does it really mean? Part 1

The team was confused towards the end of the first sprint planning. After discussing the priorities and available capacity, the team selected stories from the top of the backlog for the sprint. The Product Owner insists that the team must “commit” to delivering the selected user stories at the end of the sprint. Apathy quickly sets in. Team members became apprehensive and started bringing up myriad of reasons why they may not be able to “commit” to the stories due to the unknowns/dependencies that still needs to be figured out, they started “padding” the story points for user stories that we thought were well understood. All of a sudden the sprint planning degenerated into “waterfalling”. Team members were not willing to “commit” as the Product Owner looks more and more like a contract negotiator - with list of targets that will be blown if team is not committing to completing the stories.

As the ScrumMaster - what do you think went wrong here and what would you do?