A small German landing could create a strategic crisis without a large amphibious invasion. A reinforced battalion concealed aboard a merchant ship might seize an island without armed forces of its own, with further troops potentially arriving by air. German-held Iceland could provide an aircraft base threatening North Atlantic convoys. Retaking it would require a difficult British amphibious operation and expose Icelandic civilians to fighting. Preemptive British occupation denied Germany that opportunity, and American troops later took over the garrison responsibility.
Notable Point · 1:14:22-1:17:58
Why Britain occupied Iceland in 1940
Britain occupied Iceland to prevent a small German seizure from creating an air and naval base that would endanger Atlantic convoys and require a costly amphibious recovery.