ولما أن جاءت رسلنا لوطا
And when Our messengers came to Lut,
Then the angels left him and visited Lut in the form of handsome young men. When he saw them like that,
سيء بهم وضاق بهم ذرعا
he was grieved because of them, and felt straitened on their account.
means, he was worried since if he had them as guests then he was afraid for them and what his people might do to them, but if he did not host them, he was still afraid of what might happen to them. At that point he did not know who they were.
وقالوا ﻻ تخف وﻻ تحزن إنا منجوك وأهلك إﻻ امرأتك كانت من الغابرين
إنا منزلون على أهل هذه القرية رجزا من السماء بما كانوا يفسقون