The word I'm looking for is probably a synonym of 'discouraged' or 'disheartened'.

Context: You are working on some project, and it has been going smooth so far. Suddenly a problem or challenge presents itself, and you feel that you are ill-equipped to deal with it or that it seems "too difficult". As a result you feel less than good, you lack confidence that you can do it, and you try to either procrastinate or side-step it.

Example sentence: In the above story, John felt ___.

What's the best word to describe this feeling?

'dishearten' as it is defined -- "to cause to lose hope, enthusiasm, or courage" -- is not a bad word, as in this context one does lose enthusiasm as well as confidence (courage?) in proceeding. But bear in mind that the word I'm looking for is in project-context (of a knowledge worker) rather than any dramatic life context.

Above all, it is a word to describe the feeling. To put a precise label on it.

Clarifications

Why not a generic word (like 'discouraged')?

"discouraged" is a fine generic word to describe this. My desire to be more precise however arises from motivation of affect labeling.

I think "discouraged" doesn't quite capture the faux inevitability of the situation. If I did not feel overwhelmed, I would not be discouraged. I would not be dispirited, but rather kept on feeling spirited when presented with an seemingly insurmountable challenge.

Related concept in psychology

This word connotes a mindset that people tend to have, on easily giving up on a challenge (the word itself refers to the feeling engendered by it). Carol Dweck calls the opposite mindset as "growth mindset".

Solution 1:

In effect, John felt deflated.

As the Cambridge dictionary defines it:

feeling less confident and positive than before:

Her criticism left me feeling a bit deflated

The metaphor is of something inflatable, e.g., a ball, and earlier on, when things were going well in the project, the ball was full of air (positive emotions and energy in working on the project), but when the overwhelming challenge came, it deflated the ball.

Another good word might be crestfallen:

disappointed and sad because of having failed unexpectedly:

He looked crestfallen at their decision

Solution 2:

To accomplish conveying this idea, one could structure the sentence in a way to describe the challenge rather than the person who has been presented with the challenge.

Suddenly a seemingly insurmountable problem or challenge presented itself.

But, to address your question more directly

the word I'm looking for is in project-context (of a knowledge worker) rather than any dramatic life context. Above all, it is a word to describe the feeling.

I'm not sure why discouraged isn't acceptable, I belive it is a word that fits quite nicely.

Discouraged, adjective

If you work on a project [...] you may feel discouraged, meaning your enthusiasm and optimism have been replaced by doubt and negativity.

Otherwise, you're just looking at other synonyms of discouraged; all of which mean something along the lines of: daunted, devitalized, to lose hope, to not feel good enough, to want to avoid something due to feeling inadequate.

To my knowledge there is no single word that is specific to working on a project, but discouraged or any of its synonyms are very commonly used when referring to a project, and usually the context is enough to supply that information.

Possibly Related

The Dunning-Kruger Effect, wherein one who knows little about something thinks they are above average, and someone who has learned, knows a good bit, and has experience about something initially feels stupid on the subject (usually due to feeling overwhelmed) before beginning to gain confidence again.