Iceland's Met Office has increased the risk of the Bárðarbunga volcano system erupting, prompting airlines’ fears of a repeat of the disastrous 2010 ‘ash crisis’, which saw flights grounded across Europe with an estimated $1.7 billion cost.

The Met Office said in a statement there were “strong indications of ongoing magma movement”, raising the aviation warning to orange, the second highest on the colour code.

An eruption of the volcano system, located under the north-west region of Iceland’s Vatnajokull glacier, would potentially lead to flooding or the emission of gas.

Yesterday, after “intense seismic activity” over the weekend, officials noted an M4 earthquake – the strongest in the region since 1996.

Smoke billows from the erupting volcano with fire in 2010 (Rex Images)

"Presently there are no signs of eruption, but it cannot be excluded that the current activity will result in an explosive subglacial eruption, leading to an outburst flood and ash emission," the Met Office said.

The aviation colour codes are used to indicate the level of risk for air travel.

The orange alert shows the volcano is showing “escalating unrest with increased potential of eruption”, or is erupting without any major volcanic ash emissions.

Eurocontrol, the Brussels-based agency responsible for co-ordinating European airspace, said in a statement it was aware the Icelandic Met Office had revised the status of the volcano and it was following the situation closely.