I did a merge from a remote branch (master) into my feature branch. In my branch, I had modified a certain file. In the remote (master) branch, the file had been deleted.

This resulted in a conflict, but the only way to resolve this conflict is to either accept the deletion or re-add the file with my changes.

The Launch External Merge tool option created all the files for a 3-way DIFF, except "LOCAL" was empty and for some reason that caused SourceTree to not launch the external merge tool. So, that option effectively does nothing.

The "Resolve Using Theirs" option kept my version of the file. I didn't try "Resolve Using Mine".

It appears that SourceTree doesn't know how to handle conficts due to file deletes. It would be nice if the UI could at least indicated "This file was deleted". I had to drop to the CLI to query the git status to even find out why it was conflicted.