Iceland’s stock market suffered a 79% fall from peak to trough during the 2008 financial crisis.
The benchmark OMX Iceland 15 index reached a high in July 2007 before collapsing as Iceland’s highly leveraged banking system came under extreme pressure. Iceland’s three largest banks—Glitnir, Landsbanki, and Kaupthing—failed or were taken over by the state in October 2008.
The country’s banks had expanded rapidly relative to Iceland’s small economy, borrowing heavily in international markets. When global credit froze after the wider financial crisis intensified, refinancing became impossible. The government guaranteed domestic deposits, imposed capital controls, and sought international assistance.
The market decline is sometimes confused with the later European sovereign-debt crisis centered on countries such as Greece and Portugal. Iceland’s crisis was especially associated with the collapse of an oversized banking sector and the country’s currency and financial system, rather than a stock exchange alone.