Before the announcement, Kilduff had expected Trump would "finesse" and "negotiate" the deal. However, now there is clearly a "U.S.-Israeli-Saudi alliance," which was laid bare after the two countries came out in support of the U.S. decision, Kilduff added.
Oil pared its losses after the news. U.S. West Texas Intermediate crude settled down $1.67, or 2.4 percent, at $69.06 a barrel, well off a 4.38 percent decline earlier in the day. The settlement was delayed by nearly an hour because of extremely high trading volume.
Brent crude fell 46 cents, or 0.6 percent, to $75.71, also paring back an earlier decline of 4 percent.
Kilduff believes we've only started to hear the rhetoric on the issue.
"The temperature now is not going to stay steady or go down, it's only going to go up," he said.
Furthermore, if there is some stepping up of attacks by Iran's proxies on Israel or Saudi Arabia, it could be a breaking point, particularly with Saudi Arabia, Kilduff added.
"One of these next attacks, or potential attacks or attempted attacks ... could be the precursor to something much bigger," he predicted.
While Saudi Arabia still has almost 3 million barrels a day of spare oil capacity, he thinks the kingdom will still let the prices head up toward $85 a barrel.
He said $100 a barrel or more is possible "if there is an outbreak of hostilities."
— CNBC's Tom DiChristopher contributed to this report.