A 5.7 magnitude earthquake on Tuesday struck Iceland's largest volcanic system, which is on orange alert for increased potential of eruption.

A major explosion at the Bardarbunga volcano, located under a glacier, could stage a replay of the global travel chaos that followed when another Icelandic peak erupted four years ago, creating a massive ash cloud across Europe.

The tremor, registered on the Icelandic Met Office's website, was the strongest recorded in the volanic system since the volcano became active a week and a half ago.

It was also the most powerful earthquake to hit the area since 1996.

The alert level for Bardarbunga was downgraded to orange on Sunday after one day at the highest level, which led to the closure of airspace in the affected area.

However, all airports in the country have remained opened since the tremors began.

Seismic activity remains high in the area, with earthquakes shaking the volcanic system more than 20 times per hour on Tuesday morning.

The eruption of Eyjafjoell, a smaller volcano, in April 2010 caused travel mayhem, stranding more than eight million people in the widest airspace shutdown since World War II.

Iceland's most active sub-glacial volcano Grimsvotn erupted in 2011, forcing the country to temporarily shut its airspace and sparking fears of a repeat of the Eyjafjoell flight chaos.

Iceland is home to more than 100 volcanic mountains, including some of the most active in the world.