The Icelandic government has advocated for a peaceful resolution to the Israeli-Palestinian conflict and has called for international recognition of the State of Palestine.

[6] In November 2011, the Althing approved a resolution recognizing an independent and sovereign State of Palestine within the pre-1967 Six-Day War borders becoming the first western European nation to do so.

[7][8] In September 2015, the Icelandic capital of Reykjavík voted in favor "of a general boycott of Israeli goods as long as the occupation of the Palestinian territories continues.

"[9] Within a week, Reykjavik mayor Dagur Eggertsson amended the proposal that the boycott would apply only to products from Israeli settlements.

[13] FTT also urged the Icelandic National Broadcaster (RÚV) to withdraw from the competition unless Israel is denied participation on the same grounds as Russia was due to its invasion of Ukraine.

It was reported in 2017 that Israeli tourists account for 33 thousand guest nights in Icelandic accommodations with a vast majority during the summer months.