It sounds like you are struggling with guilt feelings, hence your question to me, 'Am I being cruel' to end the relationship.
The fact is that you aren't the one ending the relationship; he is. He has told you that he isn't capable of being in a relationship, which is his way of ending it. So, in essence he did the dirty work for you. Now, you need to ask yourself what you want. Do you want to take the out that he gave you or do you want to fight for him?
My guess is that you are leaning toward moving on but you are feeling guilty over leaving him to marinate in his own misery. The bottom line is that you aren't his mommy and you aren't his therapist. He isn't working on healing himself. Instead he is running away from his feelings.
Being in a relationship with you forces him to face all the feelings that were activated by the disaster, and he doesn't want to deal with these feelings. Ending the relationship is his avoidance tool. If he isn't willing to fight for himself and the relationship, why should you? If you want to send out one last flair before moving on, you could tell him that he is avoiding facing the feelings that the disaster awakened in him. He can break up with you and avoid all attachments in the future, but this isn't solving the problem.
If he is interested in hearing more, then you could tell him that you think that he is terrified to love and to lose. After all, he saw death in the face and it has scared the hell out of him. Cutting off his attachment to you is hardly the way of dealing with his fear of losing a loved one.
Yes, he can avoid facing the fear by staying alone, but the price he pays is that he loses out on life. In order to avoid the pain of losing, he won't be able to experience the joy of loving. If he wants to make this trade off, he needs to do it with full consciousness.
If this is how he chooses to live from here on in, let him tell you directly, so you can feel free to move on and not look back.