Denmark have great hotdogs, and also a great hard-boiled sweets shop.
Iceland literally has a total of 2 armed aircraft, both of which are helicopters and 5 lightly armed patrol vessels and only 200 military personnel. Denmark has 9 frigates and 8 patrol vessel plus 33 F-16s and 9 helicopters capable of anti-surface warfare. 12,500 army personnel with 38 leopard 2s in active service, 135 Mowag Piranha and IKK IFVs, 18 SKH and Caesar self propelled artillery pieces and 5 battalions of infantry. Iceland's geography might help them for a while but its not really a contest.
Because Denmark has a lot of advantages over Iceland I feel it will have a much better chance of winning an armed conflict. Iceland doesn't even have its own standing military and Denmark has a larger military budget with more personnel. Iceland hasn't had a standing army since 1869, however, for its homeland defense it has got a Coast Guard but it isn't so powerful, in total it has got 3 patrol vessels, 3 helicopters, and 2 patrol boats along with just 200 serving personnel which is where the entirety of the active personnel of the Military of Iceland is deployed. Due to this Iceland would likely be easy to invade for Denmark as the Danish Royal Navy holds 12 large vessels, 4 medium-sized vessels, and 38 smaller boats and holds 3,400 personnel. Along with the much larger Navy, the Royal Danish Airforce has 93 aircraft, easily enough to get through the Icelandic aircraft defense. Iceland's military budget is also tiny compared to Denmark, the Iceland budget is $45,529,700 US, comparing this to the Danish military budget of $3 Billion US the Danes have the ability to purchase more aircraft, boats, and weaponry than Iceland.