Hi Jason,
Correct answer is the first one - the route is removed from the table. Even if a route is static (meaning it is not learnt and updated dynamically), it still has to be meaningful if it should be placed into the routing table. A route whose outgoing interface is not available is not usable - it is useless, and therefore removed from the routing table.
Static does not mean "alive forever". Static means "not capable of adapting itself". A static route indeed can not adapt itself. It may only be present or impresent, but it is not capable of, say, changing its own next hop or outgoing interface.
Best regards,
Peter