"If Iran enters the war, we're going to see much higher oil prices, obviously," Sheffield said Wednesday on CNBC's "Squawk Box."
Iran is a major oil producer and key backer of Hamas, the Palestinian militant group designated by the U.S. as a terrorist organization. A wider conflict could pose a major threat to global crude supplies, which have been cut back by Saudi Arabia and Russia in recent months.
Brent crude traded slightly lower to $86.93 a barrel Wednesday, while U.S. West Texas Intermediate (WTI) crude fell by 78 cents, or 0.91%, to $85.19. Brent and WTI had surged more than $3.50 on Monday on concern that the clash between Israel and Hamas could escalate into a broader conflict.
"It's going to be up to [Prime Minister Benjamin] Netanyahu, I believe. So depends on how much evidence he has that they're behind it and whether or not he decides to do anything about it," Sheffield said.
The death toll is rising in Israel as missiles rain down and hostilities head into the fifth day. The Israeli military said it is amassing troops near the Gaza Strip.
U.S. Secretary of State Antony Blinken, who is due to arrive in Israel on Thursday, said Sunday it is not clear there was any involvement by Iran.
Exxon Mobil said Wednesday it agreed to buy shale rival Pioneer Natural Resources for $59.5 billion in an all-stock deal, or $253 per share.