This is a very very odd bug I do not understand at all. Whenever I use the cat eye spell for Khajiit's and get struck in combat my screen will flicker continuously. It also looks like it displays the last save screenshot every millisecond then goes back to nighteye. This occurs for as long as I am in combat. I don't know what could cause this so I am going to assume it is a setting I am using or a mod.

EDIT: It now happens regardless of whether I am in combat or not.

I've been thinking maybe it is a shader issue etc. but reinstalling OBGE didn't help and installing other cat eye/night vision mods did not either. The screen still constantly switches from cat eye to what appears to be a screenshot and I cannot resolve it. I've tried with and withouy HDR. Sometimes my screen also goes completely black or gray for a few seconds and the Nvidia black screen fix has not helped.

EDIT: Cleaned up my load order some, still same issue. Also tried Timeslip's Night Eye replacer but still have the same problem.

Here is my new load order...

Oblivion.esm
All Natural Base.esm
Francesco's Leveled Creatures-Items Mod.esm
Francesco's Optional New Items Add-On.esm
Oscuro's_Oblivion_Overhaul.esm
Mart's Monster Mod.esm
TamrielTravellers.esm
FCOM_Convergence.esm
Better Cities Resources.esm
HorseCombatMaster.esm
HrmnsOblivionScriptOptimizationv1.0.esp
Unofficial Oblivion Patch.esp
DLCShiveringIsles.esp
Unofficial Shivering Isles Patch.esp
Better Cities .esp
FCOM_Francescos.esp
FCOM_FrancescosItemsAddOn.esp
FCOM_FrancescosNamedBosses.esp
All Natural.esp
All Natural - SI.esp
Immersive Interiors.esp
Immersive Interiors - Lights Addon.esp
All Natural - Real Lights.esp
better lights.esp
P1DrobesOver.esp
ReneerVariedNPCsMod.esp
Living Economy.esp
Enhanced Economy.esp
moDem's City Life.esp
DropLitTorchOBSE.esp
P1DlookHereYou.esp
Streamline 3.1.esp
Map Marker Overhaul.esp
Map Marker Overhaul - SI additions.esp
Expanded Hotkeys and Spell Delete V2.esp
Rope Ladders v1.esp
Oscuro's_Oblivion_Overhaul.esp
OOO-Water_Weeds.esp
OOO-DLT_Remover.esp
Mart's Monster Mod - Additional Enemy NPC Vars.esp
FCOM_Convergence.esp
FCOM_RealSwords.esp
FCOM_DurabilityAndDamage.esp
Mart's Monster Mod - More Wilderness Life.esp
FCOM_SaferRoads.esp
FCOM_LessRats.esp
Mart's Monster Mod - Extra Wounding.esp
Mart's Monster Mod - Looting NPCs & Creatures.esp
Mart's Monster Mod - Safer Quest Locations.esp
Mart's Monster Mod - Dungeons of MMM.esp
Mart's Monster Mod - Hunting & Crafting.esp
Mart's Monster Mod - Farm Animals.esp
Mart's Monster Mod - Diverse WaterLife.esp
Mart's Monster Mod - Slof Horses Complete.esp
TamrielTravellerAdvscript.esp
TamrielTravellers4OOO.esp
TamrielTravellersItemsnpc.esp
TamrielTravellersItemsVendor.esp
ShiveringIsleTravellers.esp
ShiveringIsleTravellersFriendlyFactions.esp
FCOM_TamrielTravelers.esp
FCOM_DiverseGuardUnity.esp
FCOM_HungersUnitySI.esp
FCOM_FriendlierFactions.esp
FCOM_MoreRandomSpawns.esp
FCOM_MoreRandomItems.esp
Mart's Monster Mod - Shivering Isles.esp
OOO-WaterFish.esp
Scribe Supplies.esp
VaultsofCyrodiilBC.esp
Knights.esp
FCOM_Knights.esp
Harvest [Flora].esp
Harvest [Flora] - Shivering Isles.esp
Dungeon Actors Have Torches 1.6 DT.esp
Exterior Actors Have Torches 1.3 DT.esp
GP_Lockpicks.esp
P1DkeyChain.esp
PersuasionOverhaul_LITE.esp
ScriptIcon_Replacer.esp
RealisticForceMedium.esp
RealisticMagicForceMedium.esp
RealSleepExtended.esp
Addendum - Vampires.esp
SupremeMagicka.esp
SM_ShiveringIsles.esp
SM_OOO.esp
SM_MMM.esp
SM_EnchantStaff.esp
SM_UnlockSpells.esp
SM_Scrolls.esp
MidasSpells.esp
Enchantment Enhanced.esp
EnchantmentRestore.esp
EnchantmentRestore_Wells.esp
SM Combat Hide.esp
StealthOverhaul.esp
Stealth Entrances v1.esp
RenGuardOverhaul.esp
Enhanced Grabbing.esp
Denock Arrows.esp
Deadly Reflex 6 - Timed Block with no damage or durability changes.esp
Mounted_Spellcasting_Deadly_Reflex_Compatible.esp
DRSplatter.esp
Duke Patricks - Near Miss Magic And Arrows Alert The Target.esp
Duke Patricks - Actors Can Miss Now.esp
Duke Patricks - Fresh Kills Now Alert The NPCs.esp
Francesco's Slower skills x1.5.esp
SP1stPLegs.esp
bgBalancingEVCore.esp
Better Cities Full.esp
Better Cities - VWD of the IC.esp
Better Imperial City.esp
Better Imperial City FPS Patch.esp
Better Cities Full FPS Patch.esp
Francesco's 10 days respawn time - 1-20 day lenght rescale.esp
P1DshieldNoGlow.esp
FCOM_Archery.esp
Argonians and Khajiit Lose Tails no More Script.esp
Duke Patricks - BASIC Script Effect Silencer NIF REMOVED.esp
All armor and SE armor playable.esp
Expanded Hotkeys and Spell Delete manual.esp
SkillsOver100.esp
Horse_AI-2364.esp
Better Torches.esp
DeadlyReflex 6 - Combat Moves.esp
Bashed Patch, 0.esp

This just started happening to me too, removing OBGEv2 fixed it. Which is not a suitable solution in the least ;.; It was also happening when I tried to make a new character, it would start flashing the default Imperial at me when I turned the view to the side, very freaky and unsettling.

Yeah I removed it but it still occurred for me. OBGEv2 is required for several of my must have mods, I sure hope that there is a fix.

Removing OBGEv2 resolved the issue for it happening when out of combat, however whenever I am struck in combat it starts flicking widely again. This might relate to Deadly Reflex 6?

If it means anything, I don't have that mod. But my problem appears to have resolved itself just as mysteriously as it came - I suspect it's one of those problems that has no single definite cause or resolution. Sorry Dx

Sounds like your hit shader got messed up. Either reinstall Oblivion or overwrite your current shader pacakges (the .sdp ones) with the defaults which you can find on Nexus.

I removed OBGEv2 and all of it's components and now I no longer have the issue. It seems that it was conflicting with the Night Eye effect.

I have the exact same problem but it happens randomly in combat, doesn't matter if I use nighteye/cateye.

OBGEv2 is the cause of it. I'm not sure why though.