Iraq and Syria would notionally merge, which would cause a political earthquake. The combination would actually counterbalance Egypt, leading to a possibly more stable Union even if both in Cairo and wherever the capital of the Syraq side will end up to be (the obvious symbolic, and geographically reasonable choice, would likely be... Raqqa, if Baghdad and Damascus are excluded) you will see factionalism and conflict between parties even if formally disbanded. Nasser would try to dominate the entire thing, which would be poorly received in Syria and Iraq (as it was in Syria IOTL).
I agree that an attempt to seize Kuwait is likely here, so would be an even worse escalation in South Yemen. Both Israel and Saudi Arabia, and to a lesser extent also Iran, would be terrified. This UAR, if it manages to keep itself together, would have to worry about many fronts at once, Palestine being obviously the foremost worry, but also having to engage in the border conflict with Iran, a confrontation with Britain over Kuwait/the Gulf/perhaps South Yemen, North Yemen and more generally ideological and territorial issues with Riyadh, the Kurdish question, support to Algerian revolutionaries and possibly Saharawi ones in time (and/or Eritreans?) and ofc Lebanon. Jordan would also be very actively hostile and very likely to be unstable in this context.
Israel would possibly launch a pre-emptive strike of the Six Days type earlier, but maybe without involving Jordan (so strategically more similar to the October War, albeit likelyhood of that spilling over to either Lebanon, Jordan or both remains).