This verb form is not reflexive. True reflexivity implies some action by the subject on itself, but becoming confused is not an action, and the subject of the verb is clearly not doing something to confuse himself; he is just confused or has gotten confused (possibly). It is also not passive (that is, it is not an example of the so-called voz pasiva refleja or se-passive) precisely because the verb cannot be interpreted as having the spying man deceiving himself, so there is no possible way to express the idea with a subject and an object, and if there is no underlying object, no passive is possible.
The DPD explains the various uses of confundir (in Spanish), and refers to confundirse as intransitive and pronominal. “Pronominal” only tells you it needs a reflexive pronoun, but it is a vague label. Technically this kind of verbs are said to be in mediopassive voice. A similar verb is enojarse. In general, verbs of involuntary perception, bodily sensations and emotion are mediopassive in Spanish, and appear as pronominal intransitives like cansarse, marearse, aburrirse, etc.
ADDENDA: Confundir can certainly be an active verb, with a meaning similar to engañar (that is, deceive, confuse or mislead someone, actively and/or willingly), but the pronominal version is always interpreted as mediopassive. A third use of confundir has the meaning of “mistake one thing (for another)”. This is an involuntary action or a mental state, and as such it sometimes becomes pronominal as well (confundirse una cosa con otra). Another pronominal version of the verb employs a prepositional complement with de, e.g. confundirse de lugar.