With more than a third of votes counted, Left-Green Movement, the conservative Independence Party and the centre-right Progressive Party together credited with 41 of 63 seats in the parliament, up from the 33 seats they held previously.
Iceland's government was poised to win a clear majority in Saturday's election, partial results have showed, though it remained to be seen if Prime Minister Katrin Jakobsdottir's left-right coalition would agree to continue in power together.
The three-party coalition has brought Iceland four years of stability after a decade of crises.
With more than a third of votes counted, Jakobsdottir's Left-Green Movement, the conservative Independence Party and the centre-right Progressive Party were together credited with 41 of 63 seats in parliament, up from the 33 seats they held previously, early results showed on early Sunday.
Now here's a new wrinkle: by the ballots counted so far, the Independence Party and the Progressive Party are just one seat away from a majority of seats. They're in the current coalition, and have governed as a pair before. Both party leaders won't comment on this possibility.— The Reykjavík Grapevine (@rvkgrapevine) September 26, 2021
Jakobsdottir's future uncertain
But the Left-Green Movement was seen losing ground to its right-wing partners, putting Jakobsdottir's future as prime minister - and the coalition itself - in doubt.
"We will have to see how the governmental parties are doing together and how we are doing," Jakobsdottir told AFP, as the partial results showed her party losing one seat in parliament from the 11 it won in 2017.
A clear picture of the political landscape was however only expected to emerge later on Sunday when all votes had been counted.
A total of eight parties are expected to win seats in the Althing, Iceland's almost 1,100-year-old parliament.
The splintered political landscape makes it tricky to predict which parties could ultimately end up forming a coalition.
"I know that the results will be complicated, it will be complicated to form a new government," Jakobsdottir said.
The largest party looked set to remain the Independence Party, whose leader Bjarni Benediktsson, the current finance minister and a former prime minister is eyeing Jakobsdottir's job.
It was seen gaining two seats, to 18.
"These numbers are good, (it's a) good start to the evening," he told public broadcaster RUV.
But the election's big winner appeared to be the centre-right Progressive Party, which was seen gaining five seats, to 13.
Coalition to hold talks
If the partial results are confirmed, the Progressives would become Iceland's second-biggest party, elbowing out the Left-Green Movement.
Party leader Sigurdur Ingi Johannsson declined to say whether he would consider building a minority two-party coalition government with the Independence Party.
"I will wait to comment on any possible government cooperation until we have clearer results," he told public broadcaster RUV.
Eva Onnudottir, a political scientist at the University of Iceland, told AFP there was "a possibility" the current tripartite government would decide to carry on together.
"All the leaders of the three government parties have said they would naturally speak to each other if they would hold onto the majority after the election."
However, the only reason the three look set to keep their majority is because of the strong showing on the right, while the left has lost support.
"What will the Left-Greens do with that? We will see," she said.
With eight parties set to be represented in parliament, there are numerous coalition options for the parties to seek out.
'Huge challenges' ahead
During her four-year term, Jakobsdottir has introduced a progressive income tax system, increased the social housing budget and extended parental leave for both parents.
Broadly popular, she has also been hailed for her handling of the Covid-19 crisis, with just 33 deaths in the country of 370,000.
But she has also had to make concessions to keep the peace in her coalition, which may have cost her at the polls.
She said on Saturday that if returned to power, her party would focus on the "huge challenges we face to build the economy in a more green and sustainable way," as well addressing the climate crisis where "we need to do radical things".
This is only the second time since 2008 that a government has made it to the end of its four-year mandate on the sprawling island, and the first time since 2003 that a government has retained its majority.
Deep public distrust of politicians amid repeated scandals sent Icelanders to the polls five times from 2007 to 2017.