Neatsfoot oil will soak-in and soften the leather, assuming it is veg tan leather. Once applied, you can bend and work the leather to allow the oil to work its way into the fibres.
If you soak the holster in water, it will inevitably dry-out the leather even more, as some of the natural tanning oils will be washed out, so if you go the moulding route, i’d advise that you also condition the leather after.