The Arsenal midfielder left the field at Vicarage Road with the Gunners 2-1 up and after being booed by some of the Watford supporters, he responded by reminding them of the scoreline using his fingers.
After collecting the ball inside the area from goalkeeper Bern Leno, the Greece worldwide then played a sloppy pass forward that was intercepted by Gerard Deulofeu, allowing Tom Cleverley to score and bring the Hornets back into the game.
Tom Cleverly was next to have a go, driving forward unchallenged from midfield and unleashing a rocket of shot that the German keeper was forced to tip over the bar.
It all accounted for another frustrating day in the office for the Gunners, whose captain Xhaka conceded they were overwhelmed after the break and struggled to get a foothold in the game.
The Gunners raced into a 2-0 half-time lead thanks to goals from Pierre-Emerick Aubameyang before turning into their own worst enemy and gifting the hosts a share of the spoils.
Watford thought Will Hughes had drawn a foul from Danny Cebellos in midfield but the referee was unmoved. Sead Kolasinac ran forward and passed to Aubameyang, who stopped the ball with his left boot and spun around to fire it in with his right.
BOURNEMOUTH, England - Callum Wilson scored twice to help Bournemouth beat Everton 3-1 for the side's second Premier League win of the season on Sunday.
Granit Xhaka admits Arsenal were too scared against Watford
Watford refused to lay down and nearly halved the deficit through Deulofeu after Guendouzi was caught in possession but Leno was once again equal to the Spaniard's rasping drive.
Going into the break, the home side might have felt unlucky to be two goals behind and started the second half on the front foot looking to change that.
Ozil showed just what Arsenal had been missing in the 32nd when he split the Watford defense with a brilliant ball to send Ainsley Maitland-Niles though.
Arsenal were on the ropes and on 80 minutes, it was another defensive error that handed Watford their equaliser. Then, David Luiz gave away a silly penalty which was scored by Roberto Pereyra.
Watford should have won it with Abdoulaye Doucoure sidefooting into Bernd Leno's arms in injury-time when surely he had to score and cap a remarkable comeback in the first game since Javi Gracia was sacked as head coach.
Here's how the Arsenal players performed on a miserable afternoon...