A volcano erupted late on Monday in southwest Iceland, spewing lava and smoke across a wide area after weeks of intense earthquake activity, the country's Meteorological Office said, threatening a nearby town, according to Reuters.

Fearing a significant eruption on the Reykjanes peninsula, authorities last month evacuated the nearly 4,000 inhabitants of the fishing town of Grindavik and closed the nearby Blue Lagoon geothermal spa.

"Warning: Eruption has started north of Grindavik by Hagafell," the Met Office said on its website, noting that the eruption began only a few kilometres from the town and cracks in the ground stretched toward the village located about 40 km (25 miles) south-west of Iceland's capital city Reykjavik.

Reykjavik's nearby Keflavik International Airport remained open, albeit with numerous delays listed for both arrivals and departures.

Images and livestreams of the eruption shown by Reuters and others showed molten rock spewing spectacularly from fissures in the ground, their bright-yellow and orange colours set in sharp contrast against the dark night sky.

"Seismic activity together with measurements from GPS devices indicate that the magma is moving to the southwest and the eruption may continue in the direction of Grindavik," the Met Office said.