Initially I thought this was a bug from the Jetty HttpClient Java library, after I filled out a bug report and things were checked into we found out that Fiddler proxy replies to the CONNECT with a response that contains Connection: close.
I tried to capture the same traffic in Charles and it's working with no issues. Here is the link to my Jetty bug report page.
https://github.com/eclipse/jetty.project/issues/973#issuecomment-250836144
Here is the link to the log file http://dropcanvas.com/11ltw
Any idea why it's working fine in Charles but not in Fiddler?