Focus
Summary: choose wisely the necessary "difficult" words that you need to set the tone, the style and the setting, and avoid all the others.
The absolute basic is that any story can be told with a bare minimum of words. Many suggested reading books for language beginners are abridged versions of literary masterpieces, based on reduced dictionaries of a few hundred words.
Any word beyond the bare minimum should have a purpose. Typical purposes are: setting the tone, coherence of style and setting. One can use archaic words to evoke a sense of solemnity, or to indicate to the reader that the story is set in the past. Similarly, one could stick to exact scientific terms rather than their vulgarized counterparts to communicate competence.
From the OP there are two issues at play: the use of foreign words, and the use of main language words that are unknown to the reader.
The former is easier to address. Of all the foreign words you are planning to use, pick the top ones that are better at communicating the setting or that would occur more often. For instance, "muleta" does a great job at establishing the setup in a bullfighting scene, possibly Spain in the region of Valencia. "Don", is also a good choice, while maybe a bit too generic, you may be giving a Spanish flavour to both the dialogues and the narration. In contrast, "Hola" is a poor cheap choice, as it does not establish setting, and definitively does not improve style, and thus it could be easily avoided. Keep the number of foreign terms low. The few ones that you pick will stick out, thus becoming memorable and in so doing they will render an even greater service to your short story.
Do not worry about explaining these foreign words. 873
If a muleta occurs in the plot, then it should come automatically from the writing that a "muleta" is red. And a few sentences later, that it is a piece of cloth. And that the toreador is holding it in front of the bull. The reader will piece all these things together.
The other issue is that of words that are unknown to the reader. This is a much deeper issue. In principle one could write in the style of an abridged book for language beginners. That would be not very satisfying. I am of the opinion that if the reader does not know the word "hilt" in their own language, then they should go and learn it.
That being said, it is also true that "hilt" may occur in sentences where no "hilt" is needed. unless you are describing how beautiful a sword is, "from the pommel to the tip", then consider the following changes:
* "he clenched the hilt" -> "he clenched the sword"
* "the hilt hit the dirt" -> "the sword fell to the ground"
* "the hilt broke right under the crossguard" -> "the sword snapped"
* "only the hilt sticking from the bull's skull" -> "the entire blade was deep in the bull"
In general, you can probably replace most occurrences of hilt with either "sword" or with describing what the rest of the sword is doing. Or you could drop it altogether. In the austere economy of the number of words of a short story, it is easier to make cuts to long winded descriptions, and precise terms, while keeping the plot and MC's thoughts going.
Finally, focus. I have the same issue as you do, until I remind myself that a story is about the plot and the characters, rather than an exercise in showing the rarest items from our bag of words. 873