The Spanish midfielder conceded that his side had suffered a potentially fatal setback in their La Liga title challenge by not taking three points on Saturday evening
The Blaugrana fell to a surprise 1-0 defeat at the hands of the Andalusian outfit, with Yacine Brahimi's solitary first-half strike enough to separate the sides and grant relegation-threatened Grana a vital win.
The defeat was the Catalans' fifth of their domestic campaign and, speaking after the game, Iniesta struggled to accept the fact they had slumped to such a damaging loss despite testing Granada goalkeeper Orestis Karnesis on numerous occasions.
"It's a step backward," the 29-year-old told reporters. "We made a mistake in the move that led to their goal and that really hurt us. Sometimes it's hard to find an explanation, we did everything we could to score.
"It hurts to take this backward step at this point in the league when there's so little left for the year to be over."
Barcelona have endured a nightmarish week after also being dumped out by Atletico Madrid in the Champions League quarter-finals and now trail Diego Simeone's men by a point in the La Liga table, having played a game more.
"Elimination [from Europe] is one thing, this is another aim we have dented," Iniesta continued.
"Teams like [Granada] are fighting for their lives but this is too much punishment. We should have won and we have not done it."
Barcelona are third in the league with 78 points from 33 games, currently a point behind both Atletico and Real Madrid.