Supposedly, Ingolfur Arnarson, the founder of Reykjavik decided the location for the first settlement by using a traditional Viking method. He dropped his high seat pillar into the ocean when he saw the coastline and settled where the pillars came to shore (wikipedia). However, given the longevity of the settlement since 973 A.D., there must have been more strategic decisions that played a role.
Strategies of Integration: Mediating the Built and Natural Environment in Iceland 