"...he found it set in a spring of murky water.."
Yup just like when Moses saw a tree on fire but wastn being consumed by the fire it was someting that he saw but was not the reality of such thing.
Dhul-Quran found such a place of murky water in which the sun appeared to him as though it was setting in it . We are speaking about a man centuries before the Quran was revealed in which the premitive people use to think the Sun went into the ocean or underneath the earth etc.
The Setting of the Sun in the Murky Spring of Water was Dhul Qarnain's observance of a thing that he found not a statement of reality as Allahs said following :
[18] (He left them) as they were: We completely understood what was before him.