I definitely understand how tough it is seeing your little one upset and scared and feeling helpless as a parent. My older child went through a phase of bad dreams too, and what helped was creating a 'Dream Catcher' ritual.
I involved her in making the dream catcher - we used a small hoop, some yarn, and colorful feathers, and she really enjoyed the creativity of it. Then, we hung it above her bed and explained the Native American folklore behind dream catchers, that the good dreams would slip through the web and bad dreams would get caught and disappear in the morning light. It gave her a sense of power over her fears and an understanding of warding off the bad dreams. We also instilled a rule that whenever she woke up scared, she had to whisper or shout, 'Bad dream, go away! Good dream, come my way!'
It's amazing how it empowered her and made her feel less afraid, and it helped that this little ritual gave us some fun bonding time too. The first few nights were the hardest, but the phase passed sooner than I'd expected.
I hope you find some solace in this and would love to hear if others have had similar experiences or other creative solutions!