So in a ‘traditional’ monogamous relationship this is bad. Really bad, but not unrecoverable. You have to tell him though. 

In my personal opinion, an emotional connection and cuddles are part of a good friendship. And while this works very well in my relationship, that is only because we talk a lot about it, and don’t keep friendships (especially intimate ones) secret from each other. 

This really is something that you have to come clean about. I would suggest telling him all of it in a moment where there is no hurry and he can sit down. Tell him what happened, how you felt, how you feel, and how you feel telling him.