Good question IKE.
That would be very true to the difficulty of playing allies: Giving up London or Egypt is the dilemma, what will the allies choose… I don’t know what’s best but I think both strategies can work.
Much depends on what happened UK1 and IT1 of course, so lets assume ‘Taranto’ happened (a rather standard move, especially with an allied bid). Without aid of the German luftwaffe (they will be massing against London), Italy cannot safely approach Egypt. Thats 1.
2: After Taranto and Germany pushing through for SL, London is very likely to fall but it is also very likely that it will be a pyrrhic victory for Germany. Russia will be a monster and the USA just needs to destroy the kriegsmarine.
If ‘Taranto’ did not happen UK1 I guess the situation does not change a lot if Uk2 still goes for it and stop Italy in the med… But in this case Uk2 also has the option to superdefend London, indeed possibly giving up Egypt in the long run (but only for a short amount of time if London survives).
I’ll not talk about the the possibility of the USA liberating London, as that also depends on what Japan is doing (and thus, how much investments the USA must make to prevent a pacific sudden death) but the USA should definately have enough ground and naval forces left to prevent Italy from breaking through.