What does the code of the application in question look like? What URL is it using?
The .NET Framework is hardcoded to bypass the proxy server for requests to Localhost or 127.0.0.1. As explained in the answers of the questions "asked several times here", the workaround is to use either localhost.
(note the trailing dot) or use localhost.fiddler
as the machine name. The former works even without Fiddler running (but may be rejected by IISExpress) while the latter requires Fiddler to be running but should work fine with IIS Express.