A black and orange tongue of lava could be seen covering the area that used to provide parking for 350 cars as well as space for coaches.

A service building used to store visitors' luggage was also engulfed by lava, but there appeared to be no immediate threat to the hot pools as the lava was held back by a defensive wall.

Helga Arnadottir, head of sales, operations and services at the Blue Lagoon, told the daily Morgunbladid she did not know when the site would be able to reopen to visitors.

She added that officials were currently "assessing the situation".

The fishing village of Grindavik and the Blue Lagoon were evacuated late Wednesday after an eruption in the Sundhnukagigar volcanic fissure on the Reykjanes peninsula for the seventh time in a year.

Most of Grindavik's 4,000 residents were evacuated a year ago, shortly before the first volcanic eruption in the area.

Since then, almost all the houses have been sold to the state, with its residents gone.

"About 50 houses were occupied in recent nights," said the civil protection department.

Volcanoes on the peninsula had not erupted for eight centuries until March 2021 when a period of heightened seismic activity began.

Volcanologists have warned that volcanic activity in the region has entered a new era.

Iceland is home to 33 active volcanic systems, more than any other European country.

It is located on the Mid-Atlantic Ridge, a fault in the ocean floor that separates the Eurasian and North American tectonic plates and causes earthquakes and eruptions.