The group leaders Ukraine, who had the best of a 0-0 draw with the world champions, France, in St-Denis on Saturday, were fully expected to take all three points against supposedly weaker opposition at home and, after dominating in the first period, were rewarded with the first goal when Vladislav Vashchyuk scored after 59 minutes.
However, their lead lasted only seven minutes before Stoke City's Larus Sigurdsson equalised for the visitors.
Ukraine pressed hard for a winning goal but a massed Icelandic defence held out bravely, ensuring that the group leaders had to settle for one point which takes their tally to 11 from five matches.
Iceland, who surprisingly are also unbeaten after five matches having won two and drawn three, moved on to nine points and into second place of a group also containing France and Russia.
In Moscow the Russians showed no mercy to the minnows of the group, Andorra, crushing them 6-1 in Moscow.
It was the home side's second victory in four days after the 3-0 defeat of Armenia on Saturday and keeps alive their slim chances of finishing second in the group and earning a play-off berth. They now have six points from five matches.
Romania moved to the top of Group Seven with 11 points from five matches after a hard-earned 1-0 win in Azerbaijan. Florentin Petre was the hero for the visitors, scoring the only goal in the 49th minute. The result puts Romania in a strong position to qualify, especially after two of their main rivals in the group, Hungary and Slovakia, could only manage a goalless draw with one another in Sovakia .
Estonia beat their Baltic rivals, Lithuania, 2-1 in Vilnius with two goals from Sergei Terehov, a result which took the Estonians to second place in the Group Nine table.