Oxygen K absorption and emission spectra of water molecules confined in dodecyltrimethyl ammonium chloride micelle structures are presented. The local electronic structure of the water molecules is found to be dramatically different from the electronic structure of water molecules in the gas-phase as well as in liquid water. Hybridization with states of the ions in the surrounding ions is directly observed, and evidence for stabilization of the water molecules relative to molecules in bulk water is found.