I have a conflicted file. I right-click on the file and select "Resolve Conflict -> Launch External Merge Tool". When I select the option, SourceTree creates 4 files: BACKUP, BASE, LOCAL, REMOTE.

LOCAL is empty and the merge tool isn't launched.

After some investigating using the command line, the reason that the file is conflicted is that the remote file was DELETED while I made a change to the same file. The conflict could only be resolved by either keeping my changes or accepting the delete. I tried to resolve using "Resolve using theirs", but that just kept the original file without the delete.

I'm not sure how that should be handled, but it appears that SourceTree doesn't know how to handle conflicts with deleted files. It doesn't even show up in the UI to indicate the conflict is due to a remote file delete.