City were a matter of minutes away from setting up an all-English final against Liverpool, with a 5-3 lead on aggregate as the match moved into the 90th minute.
But Rodrygo struck an incredible brace in the space of less than two minutes to send the tie to extra-time, with Karim Benzema sealing the comeback for Real from the penalty spot.
It means City once again fall short in Europe and they must now regather their focus ahead of the Premier League run-in, with just four matches to go.
Guardiola believes his side were not under huge pressure in the final few minutes at the Bernabeu, though admitted City were off their best, as he suggested the goals came out of nothing.
“We were close, but in the end we could not reach it,” Guardiola told BT Sport.
“It is simple. In the first-half we did not have game, we were not good enough. But we did not suffer much. After we scored the goal we were better.
“We found out tempo and our game and the players were comfortable. It is not like in the last 10 minutes they attack and attack and you suffer. It didn’t happen.
“They put a lot of players in the box, with Militao, Rodrygo, Vinicius, Benzema and they put in crosses and scored two goals.
“We didn’t play our best, but it is normal, a semi-final, the players feel the pressure and wanting to do it. Football is unpredictable, it is a game like this. We have to accept it.
“Now we need to process that and come back, with our people at home and the last four games we have.”