Thesis writing style: when to italicize?
There can be specific exceptions for journals, which may have conventions preserved unchanged from the past, but the general principle is to be typographically simple while conveying the necessary information. Quotation marks are required to unambiguously indicate that a certain sequence of text is a literal quotation; the quote itself should then not modify the format of the text, thus should be roman when the original is roman, italic when it is italic, and so on. Thus, your first option would be the correct choice.