First, thank you for providing context. The context is important because a term that may be appropriate for describing a confused sentence, for instance, may not necessarily be appropriate for describing a confused state of mind.

Let us begin by looking at the English words themselves.

Etymologically speaking, "confused" means "fused together" -- in other words, the state of mind being described is unable to distinguish certain things that should be distinguished. Matters that are supposed to be distinct are being perceived without distinction. The mind is in a "low resolution" state with regards to certain facts. A and B are "mixed together," resulting in a mixed-up state of mind.

"Muddled" means essentially the same thing, except that it uses the metaphor of water (in a pond, for instance) that has been stirred, resulting in mud getting mixed with the water. The water has lost its clarity. The eyes are unable to see through the water.

Both terms refer to a state of lessened perception and/or cogitation. Being "mixed up" figures in both terms, but with a difference. In the former, the mixing up is between the ideas themselves: two distinct ideas are not being perceived as distinct, but as mixed. In the latter, the mixing is in the medium, resulting in opacity of mind, as though the mind is looking through a thick fog.

In Arabic, the most common term for this state of mind is لبس or التباس. For example, replying to a question about the civil war that gripped the Islamic world in its infancy, Ali ibn Abi Talib said:

إنك لملبوس عليك. إن الحق والباطل لا يعرفان بأقدار الرجال. اعرف الحق، تعرف أهله، واعرف الباطل، تعرف أهله

The wise imam here is telling the questioner: "You are confused." Then he proceeded to separate the ideas for him to dispell the confusion.

Another term that we use is اختلاط. We say اختلط عليه الأمر

In colloquial language, deriviatives of اختلط have been invented that are evocative of the meaning itself. For example, لخبط and خربط produce a mixed-up jumble that demonstrate the very meaning they intend. This is very expressive, and it is unfortunate that such terms have not been accepted into the mainstream, although I personally have no objection to using them.

Other terms that refer to lessened clarity are إبهام and عجمة, but they may not be appropriate in every context.