Let's say the Germans manage to win a limited victory in Europe similarly to IOTL but is unable to knock out the UK and is forced to sign a peace treaty with it. By that time, the Allies have already liberated the Ethiopian Empire and taken Libya whilst slowly taking the rest of the Vichy French colonial empire. The Western Allies are forced into Africa (and the Middle East) where they focus on consolidating their power and preparing to strike back at the Germans.
What would be the effects of such a scenario? How plausible is this scenario?
Assuming that the USA stays neutral and Germany and the Soviets don't wage a war:
I don't see how Free France and GB would throw out the Axis completely.
Lets say our POD that Hitler visits Paris after the Fall of France but ITTL someone kills him there.
Göring takes over and Britain declines his (more realistic than IOTL) peace offers.
Göring flies to Moscow and has a few entertaining Wodka fueled Nights with comrade Stalin.
Stalin accepted continued ressource shipments to Germany (secretly being happy that the Fascists and Imperialists are bleeding each other dry) and in turn got the skelleton of a comprehensive settlement of influence spheres in Eastern Europe.
Göring flies home, sure he will have some shouting matches with the ideological boneheads, but some concessions in the Balkans, allowing Stalin free reign in Finnland and some German weapons are worth it. Ressources will continue flowing and the Reich can focus on forcing the stubborn Brits to accept a deal.
Then Göring flies to Spain with an "offer that you can't refuse". Either Spain joins the Axis on friendly terms with some support or Spain joins the Axis when German tanks are rolling through Madrid. Either way Gibraltar is going to fall in the near future.
With a serious focus on the Med Korsika and Malta probably will fall too, with high losses for the Axis ofc.
With a serious focus on the Med+Africa I could imagine that Göring even heavily pressures Vichy rmto become actively involved in the war or at least allow a flow of supplies through Spain-Gibraltar-French North Africa.
With somewhat more stable supply lines and much more dedicated ressources the Afrikakorps is going to be a tough enemy. Maybe with Göring in control it even has a decent commander.
If the USA don't get involved, I have a hard time seeing Free France+GB throwing the Axis out of Africa completely.
Sure the Axis won't march into Damaskus either but reaching the Suez might be in the cards...