How to deal with a period in the middle of my quotation

Solution 1:

As it's a quotation, why break it up? 1) seems correct to me.

One strategy is to avoid the issue :

Stanley thought that his and Zero’s situation was no mere coincidence: "It had to be destiny.”

That would be my first choice. Or you can dish the quotation out in two servings:

Stanley thought that his and Zero’s situation was "more than a coincidence"; he thinks (or says) that it "had to be destiny”.

Or you can use brackets to indicate a minor change and ellipsis to indicate omission of irrelevant matter, but this can add unnecessary clutter:

Stanley thought that his and Zero’s situation was "more than a coincidence ... [it] had to be destiny.”