We just went through a similar issue with our almost three year old. I do have some advice as far as training goes, but you do have to be very careful when trying any of this!
Do you have a lunge line? What we did with our horse, is we filled a spray bottle with water and hooked her up to a lunge line. When she first heard the spray bottle, she would run in circles...around and around and around. We continued to spray until she stopped and relaxed a bit, if even for a moment. When she did that we immediately stopped spraying the bottle followed by lots of praise. Then repeat. This took a few days. Then when she was calm with that, we started spraying at her. She now stands perfectly fine.
You could also use a round pen, but you don't want to do this anywhere that they can get caught in a corner and panic. They'll realize that the spray bottle isn't so bad after running around a million times! However, if your horse is freaking out over just the sound of the bottle, you may have some work to do before putting him on the lunge line as you don't want him to hurt you trying to get away. Our horse's reaction wasn't overly severe, but it was enough to prevent us from using fly spray on her. Get him comfortable with a lunge line and you could even just carry the bottle with you when you go out to feed. Get him used to the sound and the spray of water. Repitition is the key here, but remember that a scared horse is a horse that is not thinking! They'll run right through fences or over people trying to get away from something if they think it is threatening. So go slow and when training think of pressure-release. In this instance, the spray bottle is the pressure and the release/reward occurs when they relax. The ultimate reward here is the discontinuation of the spray bottle.
I hope this makes sense! Please let me know if I can clarify anything though.
(Just as an aside: A horse doesn't necessarily need to know how to lunge to train this way. Our horse didn't, but we used a lunge line so we could have a little distance from her. When she started getting better with the bottle, we moved to a lead rope.)