FileMerge quits immediately after launching from SourceTree

I regularly use Atlassian SourceTree (on Mac OS X) to launch FileMerge to resolve git merge conflicts. Out of the blue it has stopped working: when I right click and select Resolve Conflicts > Launch External Merge Tool, FileMerge launches, creates its intermediate files, then immediately exits. SourceTree interprets that as the merge process being complete.

What's the issue and how can I debug/fix it?

I note that a previous question 'SourceTree filemerge quits immediately and creates 4 files. How to fix it?' does not address this particular scenario (for one, it says FileMerge quits in the title, but in the body it says FileMerge displays /dev/null as one of the panels. Additionally, my merge conflict is not due to a removed file.)

To diagnose the problem, I ran opendiff from the Terminal. I received the following error:

xcode-select: error: tool 'opendiff' requires Xcode, but active developer directory '/Library/Developer/CommandLineTools' is a command line tools instance

To solve:

1. Open Xcode > Preferences > Locations
2. Click on the drop-down box beside Command Line Tools and select your current Xcode version. (This was empty for me because I had recently installed Xcode on a new Mac.)

3. Run opendiff in Terminal again, and the above error should no longer appear.

Now FileMerge will open correctly from SourceTree when you click Launch External Merge Tool.