In 1380, with the death of Olaf II of Denmark, Norway, and consequently Iceland, became part of the Kalmar Union, a political alliance that united Denmark, Norway, and Sweden under a single monarch, with Denmark as the dominant power. Unlike Norway, Denmark had little interest in Iceland's primary exports of fish and homespun wool, leading to a decline in Iceland's trade and economic hardship. During this period, Iceland's economy struggled, and the already isolated Greenland colony, which had been settled by Norse explorers in the 10th century, eventually died out before 1500. The Kalmar Union marked a shift in Iceland's political and economic ties, with Danish influence growing while Iceland faced increasing challenges.
After the Kalmar Union dissolved in 1523, Denmark, now the ruling power over Iceland, exerted greater control, particularly restricting trade with English merchants, who had been involved in Icelandic commerce. This marked the beginning of increased Danish influence over Iceland, which lasted for centuries.