All driving licenses issued from the U.S.A, Canada and the European Economic Area (EEA) are valid in Iceland. A driving license from anywhere else is valid if it provides:
-A license number
-The drivers photograph, name and date of birth
-A valid date
-Been printed in Latin characters
If your driving license does not fulfil any of the above requirements then you must obtain an International Driving License to be able to drive in Iceland.
There you find further informations: http://www.icetra.is/