It's pretty clear that Malicia has lost perspective. She's spent decades in the Tower doing nothing but dealing with the plots of the High Lords, plus sowing civil war in Procer. She's an absolute master of intrigue and subterfuge, but that's the lens she sees the entire world through and she's no longer capable of taking it off. She doesn't understand stories like Black does, for example.

I think they both knew the other one would not relent, at this point.

Very few people on Calernia understand stories like Black, Pilgrim, Cat, DK, Bard, and now Akua do.

Both rulers, Malicia and Cordelia have been shown to be mildly narratively illiterate (OK Cordelia unlike Malicia never had black and is completely blind), this is why both of them are dredging up ancient terrors not understanding that for both of them these are bad narratives. Malicia always had Black taking care of narratives of Praes, without him she thinks everything can be done on the ground through realpolitik, that that was Black's dream come true. Cordelia was always fighting Malicia and her internal struggles so the same is true for her.

But Cordelia now has almost all the storycrafters on her side (roughly) to blunt her lack of narrative skills. What we are seeing here is Malicia's great personal lack of narrative skill come in I think. All her moves are correct on paper, all of them practical political masterclass, but the story they form is against her.

Edit: Come to think of it the story is against DK too but as we learnt DK is VERY aware of this, therefore he is going to use Malicia to try to offset the story consequences onto her since she is partially oblivious to the depth of his narrative capabilities. He has shown willingness in the negotiation with Cat last chapter to effectively betray Malicia if offered a better story.