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Morning Snippy.

Could have?

At that point in the war,IMHO, the Germans could have. Even if Spain had not allowed access to the Germans I believe they would not have been able to prevent the Germans from grabbing Gibraltar. However, Hitler was looking to the East and without Spanish cooperation I don't think he really wanted to commit the forces or time to the effort.

Should have?

There was no plan for an "African Campaign" at the time so I believe it would have been more of a "prestige" blow to the Brits at the time. But once the Germans decided to bolster the Italians in North Africa, the closing of the straits to the Allies would have changed the entire African Campaign shifting the advantage to the Axis. In conjunction with the taking of Malta the Med would have become an Axis lake.

Good morning Snippy!

Had Hitler taken Gib, it would have been disastrous for Malta and North Africa, as the Brits would have had to ship everything via the Cape Horn/Suez route. Doenitz's subs would have had a field day. Raeder's capital ships could also have been far more effectively utilized with Gib as a safe harbour.

As for his actually TAKING Gib: well, that's an interesting question, one for those more versed in hypothetical situations than I.