Density functional theory (DFT) is used to analyze the reaction network in n-butane oxidation to 1-butanol over a Ag/Pd alloy catalyst under steric constraints, and the implications on the ability to produce 1-butanol selectively using MOF-encapsulated catalysts are discussed. MOFs are porous crystalline solids comprised of metal nodes linked by organic molecules. Recently, they have been successfully grown around metal nanoparticle catalysts. The resulting porous networks have been shown to promote regioselective chemistry, i.e., hydrogenation of trans-1,3-hexadiene to 3-hexene, presumably by forcing the linear alkene to stand “upright” on the catalyst surface and allowing only the terminal C–H bonds to be activated. In this work, we extend this concept to alkane oxidation. Our goal is to determine if a MOF-encapsulated catalyst could be used to selectively produce 1-butanol. Reaction energies and activation barriers are presented for more than 40 reactions in the pathway for n-butane oxidation. We find that C–H bond activation proceeds through an oxygen-assisted pathway and that butanal and 1-butanol are some of the possible products.