They did. See here. The UK invaded in 1940, over concerns that Iceland would be used by the Axis as a base for controlling the Atlantic. The UK (and later the US) occupied the country for the duration of the war.

If you're asking about earlier, it isn't all that close. It's several hundred miles from the tip of northern Scotland. England is as far from Reykjavik as it is from Warsaw.

Also, there's not much of a reason to. Iceland doesn't have much in the way of natural resources. Look at a map of it. Much of it is mountainous (and thus unsuited to farming), and population is concentrated along the coast.