Preheat oven to 325°F. Coat a 12 or 15-cup bundt pan with nonstick baking spray. Set aside.
Add sugar and key lime zest to the bowl of a stand mixer. Pinch together with fingertips until the sugar is fragrant and the zest is incorporated.
Add room-temperature butter, cream cheese, and oil to the bowl. Fit the stand mixer with the paddle attachment and beat on medium speed for 7–8 minutes, scraping down the sides halfway through.
Reduce mixer to low. Add eggs one at a time, fully incorporating each before adding the next.
In a medium bowl, whisk together cake flour, kosher salt, and baking powder. In a separate bowl, whisk together whole milk, key lime juice, vanilla extract, and sour cream.
Add half the dry ingredients to the batter and mix until smooth. Add the key lime juice mixture and mix briefly. Add the remaining dry ingredients and mix until just combined. Scrape down the bowl and mix for 10 more seconds.
Pour batter into the prepared pan. Bake for 1 hour 15–20 minutes, until a skewer inserted in the center comes out with just a few moist crumbs.
While the cake bakes, make the simple syrup: combine water and sugar in a small saucepan over medium heat. Boil until the sugar dissolves, about 5 minutes. Remove from heat and stir in key lime juice. Set aside.
Let the cake cool in the pan for 10 minutes, then invert onto a wire rack. Brush the entire cake with the key lime simple syrup. Let the cake cool completely.
Make the glaze: beat room-temperature cream cheese and powdered sugar with a hand mixer until smooth, 30–60 seconds. Add melted butter, key lime juice, and vanilla extract. Mix until just combined. Pour over the cooled cake and garnish with key lime zest.