What is this in reference to? I am out of the loop.

There's no loop. I really wanted to make a Elon/Bibi joke but there were only a few photos to work with. I cropped the photo and I realized their expressions seemed perfectly creepy and a great match to the headline I already wrote.

Also, wtf is this lunatic talking about?

I have no idea but my wild hunch it's nothing in particular. He saw a chance to jump into a Elon tweet-related thread about the typical use of Chicago as a racist euphemism for black people. People like him want to be racist but they also desperately want likes and mainstream engagement too.

Yes. They recycle old tropes you can find being mocked of back in the 90s.