You have to edit the variables jdk.http.auth.tunneling.disabledSchemes and jdk.http.auth.proxying.disabledSchemes to blank like this:
Change in Java 8 Update 111:
Now, proxies requiring Basic authentication when setting up a tunnel for HTTPS will no longer succeed by default. If required, this authentication scheme can be reactivated by removing Basic from the jdk.http.auth.tunneling.disabledSchemes networking property, or by setting a system property of the same name to "" ( empty ) on the command line.
You could try to run Java with
or probably better (security): upgrade the authentication scheme of your proxy, e.g. to Digest access authentication.
Thanks for your response, and kindly excuse the delay in my response. I tried passing these as JVM arguments while starting my app server but this did not do the trick for me. Were you able to solve this particular case of connecting through the Salesforce connector using these settings?
Guessing that your proxy is not allowing clients to access servers via HTTPS.