Hercules was a being who had never known the true meaning of fear. Generally, he was the one being feared by the rest, hell, even most of the Olympian gods had a hard time battling against him and yet he was about to be defeated by a mortal. That too in a one-sided battle.
His loss was even more painful because he knew Arnold was not even using his full strength against him. He was fighting against the all-mighty Hercules with a handicap and yet, he was going to win. Nothing was more embarrassing than that thought.
Zeus and Loki had carefully planned and done everything to give Hercules an unfair advantage over the mortal. They had thrown everything they possibly could to aid him, without raising other's suspicions. But even after all their planning and plotting, they were met with a miserable loss.
