Yes, Hitler should have finished his war with Britain before embarking on any new military project (like Russia). Seelöwe was not necessarily needed to accomplish this either. Instead, the Germans could have reinforced the Italians and finished Britain in the Mediterrainian basin. Taking the entire Middle East wasn't necessary, just driving the British out of Egypt and taking Suez might have been sufficent.
The air war could have been pursued long term at a lower pace than Göring's original blitz strategy. A sustained and sustainable bombing campaign was possible. Germany had the resources for it if they focused on such a strategy.
At sea the Germans could have continued the U-boat campaign but by being more scruplious about US losses kept the US from whipping up support for joining the war at home. It didn't matter if Britain was starving. It mattered that Britain was investing far more capital into fighting U-boats that Germany was in building them.
Combined with a loss or inavailablitiy of Middle East oil the British would be in the same position as Germany with limited fuel resources. With more U-boats operating in the Indian Ocean (control of the Suez Canal would have allowed that) and more operating off Africa in the Atlantic the British could have really suffered shortages of many vital resources.
With the Japanese entering the war at the beginning of 1942 the British would have been in even more trouble. With no German declaration of war on the US Lend-Lease would have dried up as the US politically could not have supported its continuation.
Britain loses in the Far East and potentially even India and Australia are threatened.
With the very real look of losing much of their overseas empire, an unabated bombing war going on at home, their forces unable to match Germany on land, a serious commerce war at sea, and the US not coming to their aid now that they have a war of their own, Britain might just have sued for peace with Germany.
Of course, things didn't work this way historically. But, had Hitler and the OKW been more savvy grand strategists they might have.