Just cuddle, hold, comfort and assure them. Only protecting arms will help them feel secure and allow them to settle again.

I don't have a child, but I do have a dad who is incredibly childish. Once, he ran into my room (starkers, which was rather disturbing) crying about a bad dream he had. I sort of screamed and through a pillow at him to cover himself up a bit and told him to go to bed. Then I went down stairs to get him a cup of tea and some biscuits, and I sat on his bed whilst he told me all about it. Then I added some rational thinking to it all (i.e. Santa is NOT out to get you) which calmed him down a bit. Then I left him to it- he's 50, he can bloody cope. Also, I have some small children who are neighbours of mine who I babysit from time to time. One of them, Izzy, suffered from 'screamy dreams' where she couldn't wake herself up and just screamed (that terrified me the first time she did that). I used to pick her up and take her down stairs, which stopped her screaming because she could tell I was holding her. Then I would stick the telly on really quiet, lay her on the sofa with her head on my lap and stroke her head because it got her breathing back to normal and calmed her right down. She would then wake up and usually burst into tears because she was so frightened, so I would sit her on my lap and cuddle her, telling her it's alright til she stopped crying, then take her back to bed, put some music on to help her sleep and usually sit with her til her parents came home or all night if I fell asleep too

My parents are comforters in situations like that.