Answer: The melting glaciers by molten lava.
Step-by-step explanation:
The icelandic town near a volcanic mountain could be a hot spot for the active volcanoes. The volcanic event could be a disastrous event which results due to development of intense heat and pressure inside the geosphere. This results in the liberation of hot lava, and gases with explosion. In the icelandic town the molten lava is likely to melt the glacier at and near the site of crator. When the glaciers melt and destroy it will lead to flood.