“There was a panic situation,” Stefansson said. “People thought a volcanic eruption was about to happen.”

The area around Mount Thorbjorn, on the Reykjanes Peninsula, has been shaken by hundreds of small earthquakes every day for more than two weeks because of a build-up of volcanic magma some 5km (3.1 miles) underground.

Land in the region has risen by 9cm since October 27, according to the Icelandic Met Office, without showing imminent signs of eruption.

On Friday Iceland declared a state of emergency over the earthquakes that have rocked the peninsula. Two strong earthquakes were felt as far away as the capital, Reykjavik, and along much of the country’s southern coast, rattling windows and household objects.

According to preliminary Met Office figures, the biggest tremor had a magnitude of 5.2

“The national police chief … declares a state of emergency for civil defence due to the intense earthquake (activity),” the Department of Civil Protection and Emergency Management said.

“Earthquakes can become larger than those that have occurred and this series of events could lead to an eruption,” the administration warned.

“Significant changes” in the accumulation of underground magma was recorded near the village of Grindavík, home to some 3,700 people, the Met Office said.

In light of this, local police and the Civil Protection authority decided to evacuate Grindavík.

The Met Office said an eruption could take place “in several days”.

Scientists are closely monitoring the situation for any indication that the seismic activity is getting closer to the surface, which could be an indication that the magma is breaking through the Earth’s crust, the Met Office said.

“Presently, there are no signs that earthquake activity is becoming shallower,” the agency said. “However, the situation could change quickly, and it is not possible to exclude a scenario involving a lava-producing eruption in the area northwest of Thorbjorn.”

Iceland, which sits above a volcanic hotspot in the North Atlantic, averages an eruption every four to five years. The most disruptive in recent times was the 2010 eruption of the Eyjafjallajokull volcano, which spewed huge clouds of ash into the atmosphere and led to widespread airspace closures over Europe.

The Reykjanes Peninsula, on Iceland’s southwestern coast, includes a volcanic system that has erupted three times since 2021, after being dormant for 800 years.

Previous eruptions occurred in remote valleys, without causing damage. While scientists say that is the likely outcome of the current activity, the magma storage chamber currently building up again could erupt less than 3km from the Blue Lagoon.

In the worst-case scenario, lava would threaten the town of Grindavík and the Blue Lagoon, along with the pipelines channelling hot water to thousands of homes that are heated with geothermal energy.

“We need to be prepared for the worst,” vulcanologist Thorvaldur Thordarson said on Thursday. “Magnitude 5 earthquakes, such as the one last night, are known to precede eruptions.”

The management of the Blue Lagoon, where tourists bask in pools of seawater naturally heated deep underground, said it decided to close temporarily because of the night’s “disruption of the guests’ experience” and the prolonged stress on employees.

The resort will remain closed until November 16, the company said. It had been criticised for not acting sooner.

Spokeswoman Helga Arnadottir said that close to 30 guests left the resort following the earthquake, but most belonged to one group travelling together.

The Met Office reported that the peninsula was shaken by about 1,400 quakes in the 24 hours to midday on Thursday. Some 24,000 tremors have been registered on the peninsula since late October.

Additional reporting by dpa