"There's no need to apologize. I'm glad she wasn't real. After all, if she was, then that means she'd either be here or with the Prince."

Of course Strange loves Arabella. Of course he's crushed that she wasn't real. He was devastated watching her fade in front of him. But, a few hours have passed and Strange has seen that some of the other guests were real. Arabella would have been miserable at the carnival and would have suffered under the Prince's thumb. As much it pains him to do so, it really is better overall that she wasn't real.

It still hurts, though. As much as he wants to logic this away, Strange can't get rid of the hurt inside his chest.