Furthermore, Italian holdings in Africa besides Libya (Somalia, Ethiopia and Eritea) are essentially forfeit.
True, but unavoidable anyway, if Italy joins the war at all. OTOH, they can be easily reconquered when Egypt falls.
In addition, if the first Italian move is again Malta, I would expect the UK to grab Tobruk, as it would take months to transfer appropriate assets to the island, break its defenses from the air and then finally send in the troops.
True as well, but if Malta goes Axis, it is rather doubtful that British Tobruk could stage any sort of prolonged hold out as it did OTL. An Afrika Korps with more troops and no supply problems can easily break them.
To knock the UK out of the war, the Axis Powers are going to have to drive all the way to Iran--to grab the UK's Oilfields.
Theoretically, yes, although losing either the Mediterranean and Suez or Iraq/Kuwait is a mightly blow to the British war effort by itself. However, one must take into account that the more the Axis forces grab of the Middle East, the more Churchill's hold onto power becomes politically unsustainable. I have rather serious doubts he can survive the inevitable vote of no confidence that is coming when Suez falls, and I'm pretty much sure that he can't do so when the Axis conquers Iraq and Kuwait. The UK are not Nazi Germany or Soviet Union, there are definite limits to the degree Churchill can keep the British public and Parliament spellbound to his total war policy with reversal after reversal.
While the Arabs are likely to be at least passively supportive of the Axis offensive in the Middle East, count on the Jews to be militantly hostile.
Very true, but not so much of a problem if one looks to the bigger picture. The fall of Egypt makes the UK look very weak, so France shall open the Syrian ports and airfields to the Axis. From there, triggering the anti-British coup of Iraq some months in advance and send Axis forces to consolidate the revolt is far from difficult. Once Iraq has fallen, the British are toast. Who cares about a bunch of Jewish insurgents by then ? It's a mop-up affair.
Cyprus might also take the role that Malta had OTL as the obstinate island fortress that thwarts Axis supply routes,
Cyprus is in a geographical position to do so only when the front has moved to Palestine. This means that Alexandria and Suez have fallen, Gibraltar and Malta did so previosuly, the RN has been forced to give up the Mediterranean, therefore British forces on Cyprus are utterly without supplies. Their ability to sustain themselves against the Axis, not to matter project any kind of force in the Eastern Mediterranean, shall diminish to zero very quickly. Where are they going to get fuel for airplanes and ships ?
With Churchill in charge of the UK, there will be no negotiated peace until the UK is absolutely crippled.
The Parliament shall kick him out well before that. With the Axis securing Egypt and advancing into the Middle East, his whole policy looks more and more like an utter failure, he can offer nothing but increasing destruction of the British Empire. The UK stands alone, the Axis is unassailable in Europe and are sinking teeth in the lifelines of the Empire. It is obvious that contesting German hegemony on the continent is a lost cause, the Nazi regime is loathsome but the British people has tried and failed to crush it by armed force, saving what can be salvaged of the British Empire is way paramount over fulfilling Churchill's stubborn crusade to the last man and gallon of fuel. Hitler has kept offering an honorable peace which saves the political independence of Britain, the Dominions, and India, too bad for Europe under fascism but Britain tried and failed, there is no shame in not being willing to fight to complete annihilation. Such arguments shall be raised in Parliament and Churchill has no good counter.
In addition, if Greece is going to get left alone, Turkey will attempt to stay out the conflict-so there is no land route to the Middle East short of going through Baku (and I don't see Stalin allowing this kind of Transit rights for Germany).
Greece and Turkey will give transit rights to the Axis when Egypt falls and the RN leaves the Mediterranean, if not quite possibly follow the example of Spain and Vichy France and actually join the Axis.
So I'm very far from convinced that this offensive would work. More Likely, the Axis offensive is stuck in the vast scale of distances involved and Iranian Oil Fields remain firmly in British hands. The UK can supply from India, the Axis would have to supply from Libya, and that's going to really hurt.
No way Churchill can hold onto power when Egypt and either Syria or Iraq fall and Britain stand alone, the British Parliament is not the Nazi Reichstag or the Soviet Politburo. Anyway, once Rommel sweeps Egypt, the Axis can supply from Alexandria. No supply problems whatsoever for Afrika Korps. Besides, once Egypt falls, the British political house of cards begins to fall as well, Greece, Turkey, Vichy France, and Iraq start to move into the Axis camp and more and more land routes, ports, and airfields supply opportunities open up for the Axis forces.
As for nuking Rome--FDR never did give the order to nuke anyone.
Yep. Death stopped him. As a matter of fact, it is quite possible that the sheer stress of seeing his anti-fascist agenda collapse with the surrender of Britain would give him an early stroke, which £$%& the USA completely, as it places far left New Age loonie and Commie sympathizer Wallace with utterly unpopular radical policies into power.
If the UK is in the conflict the USA would have entered it one way or another.
Rather unlikely ITTL. The American public is only going to accept a war with Nazi Germany if a) Hitler declares war on them on his own initiative b) Germany again messes with the Monroe Doctrine with some shenanigan like the Zimmerman Telegram. There might be a slight possibility if Germany performs a successful Sealion (leaving its feasibility aside for argument's sake). NOT because the UK is taking a pounding in Europe or the Middle East (the USA were nowhere as needful of Arab oil in early 40s and they were during the late Cold War, so the Wehrmacht in Iraq is not a casus belli for them at that time) or Germany is strongarming the UK to acknowledge her hegemony on the Continent.
If the UK is forced to a compromise peace by the fall of Suez or Iraq, Roosevelt has absolutely no way to pick a fight with Hitler in Europe, and without an undeclared naval war with the USA, Hitler is likely not going to concern one way or another when and if Japan goes Pearl Harbor.
If we remove the battle of Britain from history the allies would probably use atomic bombs as tactical weapons--just as Germany used its bomber wings for that purpose. Fascist Italy's troops would be fair game for this kind of attack.
Why so ?
If we somehow suppose that Germany never attacked the Soviet Union, we could indeed see a US Nuclear attack on Rome--perhaps to force Italy to surrender, or perhaps in a tactical role to break Italian defenses around the city.
The Americans making a nuclear martyr of the Pope ? ASB. As it is the USA picking a fight with Nazi Germany and Fascist Italy if UK goes Amiens with them. It would require the American far left somehow staging a successful takeover of the USA. Which might have been a slight possibility if the New Deal had failed, but is ASB in the 1940s. Wallace might try if he gets President and causes sharp political polarization with his radical left policies, but moderate Democrats would close ranks with Republicans and impeach his sorry ass.
Italy's economy was entirely unequal to the challenge of the role which is presented here--and a 1940 PoD is going to see the Italian Economy simply unable to assume control of Mare Nostrum against the RN.
The Italian economy, backwards as it was, was up to the challenge of taking over a vacuum, and that is what the Mediterranean shall be when the RN vacates it. And it shall to a large degree once Malta and Gibraltar falls and completely once Alexandria and Suez do.