Absolutely do not ever put oil on a leather holster, or a belt, or anything else that isn't supposed to be soft and supple.
To de-stink it, I would soak it in warm (not hot) water, then put in front of a fan or a vent until it's dry. Leave it in the air for a couple weeks. Soak it again if you need to. If the holster loses its shape, stick the (unloaded) gun* in it for the last soak/dry cycle.
When it is mostly de-stinked, get some Fiebing's Resolene. It's a water-resistant acrylic finish. It should seal the leather, so it won't smell any more. Just mix it half and half with water, then soak the holster and let it air dry. Get a wire, bend it into a hook, and hang it from a ceiling vent, so it doesn't get marks from sitting on a surface.
*wrap the gun in a layer of grocery bag to keep it from rusting. Unless it's a Glock, then it'll be fine.
edit: I owned a leather holster business for around seven years.