Prime Minister Katrin Jakobsdottir's left-right coalition is set to gain majority.
Iceland's government was poised to win a majority in Saturday's election, early results showed, though it remained to be seen if Prime Minister Katrin Jakobsdottir's left-right coalition would agree to continue in power together.
The three-party coalition has brought Iceland four years of stability after a decade of crises.
Jakobsdottir's Left-Green Movement, the conservative Independence Party and the centre-right Progressive Party were together credited with 38 of 63 seats in parliament, with more than a third of votes counted.
But the Left-Green Movement was seen losing crucial ground to its right-wing partners, putting Jakobsdottir's future as prime minister -- and the coalition itself -- in doubt.
"We will have to see how the governmental parties are doing together and how we are doing," Jakobsdottir told AFP, as the early results showed her party losing one seat in parliament from the 11 it won in 2017.
A clear picture of the political landscape was however only expected to emerge later Sunday when all votes had been counted.
A record nine parties are expected to win seats in the Althing, Iceland's almost 1,100-year-old parliament, splintering the political landscape more than ever before.
That makes it particularly tricky to predict which parties could ultimately end up forming a coalition.
"I know that the results will be complicated, it will be complicated to form a new government," Jakobsdottir said.
The largest party looked set to remain the Independence Party, whose leader Bjarni Benediktsson is eyeing the post of prime minister.
It was seen holding on to its 16 seats.
- 'Different opportunities' -
"Because there are so many parties, I think there will be a lot of different opportunities to form a government," Jakobsdottir told AFP earlier in the week.
During her four-year term, Jakobsdottir has introduced a progressive income tax system, increased the social housing budget and extended parental leave for both parents.
Broadly popular, she has also been hailed for her handling of the Covid-19 crisis, with just 33 deaths in the country of 370,000.
But she has also had to make concessions to keep the peace in her coalition.
She said Saturday that if returned to power, her party would focus on the "huge challenges we face to build the economy in a more green and sustainable way," as well addressing the climate crisis where "we need to do radical things".
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