The Baggies looked to have secured the points when Romelu Lukaku added his second goal after the break, but Jimmy Kebe pulled one back to spark a thrilling fightback from Reading.
Adam Le Fondre levelled from the spot with two minutes remaining before Pavel Pogrebnyak pounced in stoppage time to inflict a third straight league defeat on West Brom.
"I couldn't see that coming," said Clarke. "I thought we were so much in control of the game, scored two great goals, hit the post, hit the bar. So much on top.
"To lose it like that is a crushing disappointment."
Clarke felt the award of the penalty was harsh after Jonas Olsson lunged into Kebe in the area, but he refused to vent his frustration on referee Kevin Friend.
"I think it was a fair enough challenge inside the box, the referee has called the penalty. I'm not going to argue with it," he said.
"I've seen it again. For me, watching it again, I can't see that it's obviously a penalty. The referee chose at the time to give and we've got to live with it."