Iceland Observer: Deals, Data Centers, and Sticky Inflation

MarketVector™ Iceland Global Index (MVISLG) Returns:

1W: (9.36)% 1M: (7.07)% 1Y: (4.55)% Inception 12/31/20: 30.77%

M&A / PE / VC

Brim Buys Lýsi

Brim’s board approved the purchase of fish oil producer Lýsi for ISK 20 billion. The deal was previously structured at a higher valuation, but the price was renegotiated before approval. Brim also announced plans to sell its 43% stake in Melnes and its 50% stake in Polar Seafood Denmark.

Landsbankinn Invests in Qivalis

Landsbankinn has become a shareholder in Qivalis, a European project developing a regulated euro based stablecoin. Qivalis is backed by financial institutions from across Europe and is expected to launch in the second half of 2026, subject to licensing.

Renewable Energy & Industry

Iceland’s Data Center Push

Landsnet and Verne energized a new 240 MW substation on Reykjanes. The substation connects Verne’s data center operations to the transmission grid. The project is a concrete step in Iceland’s push to attract more data center and AI infrastructure investment. With abundant renewable power and a naturally cool climate, Iceland continues to look well positioned for energy intensive computing.

HS Orka Begins Krýsuvík Drilling

HS Orka has started the second phase of exploratory drilling at Krýsuvík. The company is preparing two additional geothermal wells near Kleifarvatn after receiving permits. The project could support both electricity production and hot water supply for the capital area.

Policy & Central Bank

Central Bank Raises Rates

The Central Bank of Iceland raised its policy rate by 25 basis points to 7.75%. The bank pointed to a weaker mix of slower growth, higher unemployment and inflation that is still taking time to come down. Its updated forecast lowered expected 2026 GDP growth to 1.6%. Inflation is not expected to reach target until early 2028.

Banking Competition Review

Iceland’s Competition Authority is reviewing competition in the banking sector again. It noted that banks have lowered their operating costs, but lending margins have stayed high. The authority is looking at whether limited customer switching and barriers for new competitors are keeping pressure off the banks.

Corporate & Market News

Icelandair Pilots on Strike

Icelandair’s negotiations with pilots remained unresolved during the period. With 6 flights already canceled, the state mediator said there was still distance between the two sides, with issues including duty schedules, rest periods and contract terms. The talks come ahead of Icelandair’s busy summer travel season.

Eimskip Strike Called Off

A strike involving workers on three Eimskip vessels was called off after an agreement on pay and crewing. The dispute was focused on manning levels rather than wages. The vessels involved were part of Eimskip’s container shipping operations. The agreement ended the work stoppage before it became a longer disruption.

Alvotech Updates Market Making Agreement

Alvotech and Íslandsbanki renewed their market making agreement for ALVO shares on Nasdaq Iceland. Íslandsbanki will quote bids and offers with at least ISK 8 million in aggregate market value and a maximum bid ask spread of 2.5%. Daily net market making volume is capped at ISK 16 million. The agreement is intended to support liquidity and price formation in the Icelandic market.

Economic Indicators

Inflation Stays Above Target

Iceland’s annual inflation rate came in at 5.1% in May. May inflation was 5.1%, with lower fuel prices helping offset pressure elsewhere in the index. The temporary VAT reduction on fuel lowered the CPI by an estimated 0.32 percentage points. Inflation is lower than earlier in the year, but still above the Central Bank’s 2.5% target.

Labor Market Cools

Seasonally adjusted unemployment was 5.8% in April, down from March. On a year over year basis, unemployment was still up sharply, rising from 4.0% to 6.6% among people aged 16 to 74. Employment held at 75.4%, while labor force participation slipped to 80.0%.

Trade Picture Remains Mixed

Iceland posted a goods trade deficit of ISK 65.8 billion in April, with imports well above exports. Services trade was stronger in the first quarter, posting a surplus of ISK 29.3 billion compared with ISK 17.8 billion a year earlier. Travel export revenue was still down slightly year over year. The data show stronger services income, but continued pressure on the goods side.