@Jay1731 Is your listing under a different profile than the one you are posting here under? Because there is no listing showing for you. I looked in order to see if you are a brand new host.
If so, you could try to plead ignorance to Airbnb, because in fact there is nothing to indicate to hosts that approving a guest cancellation is in fact counted as a host cancellation.
It's one of the sneakiest, most host-unfriendly things Airbnb does.
You should never cancel yourself, and in a situation like you had, you should have contacted Airbnb, and as they already had been advised of the situation, asked them to do a neutral cancellation with no penalties to you, as this sermed to be the only way of resolving the situation for your guests.
And if guests do not want to continue to stay, they should be the ones to cancel, not you. Even if your cancellation policy means they wouldn't get a refund, the host always has the option to return money to the guest through the resolution center if they choose to.