I do not know your friend, so I cannot tell how he will react, but I think you should tell him. It's absolutely not your fault she's flirting with you, you aren't even interested. The worst thing that can happen is that he'll dump her, which, after seven years, isn't very likely. If you don't say anything, things may work out too, but suppose they get married and she runs off with another then. I'd be heartbroken in that situation. I'm not saying this will happen, they can easily become very happy together, but in the long run I think telling won't do any real harm and may make worst-case scenarios easier to accept for your friend. Good luck, Tuor.
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The last arrow of Legolas kindled in the air as it flew,
and plunged burning into the heart of a great wolf-chieftain.
All the others fled. -J.R.R. Tolkien, The Lord of the Rings
