London initially in dispute with Reykjavik leads to an international conflict (4,3)
I believe the answer is:
cold war
'an international conflict' is the definition.
'cold war' can be an answer for 'conflict' (cold war is a kind of conflict). I'm not certain of the 'an international' bit.
'london initially in dispute with reykjavik' is the wordplay.
'initially' indicates taking the first letters.
'in' is an insertion indicator.
'dispute' becomes 'war'.
'with' is a charade indicator (letters next to each other).
'reykjavik' becomes 'cod' (I am not sure about this - if you are sure you should give a lot more credence to this answer).
The first letter of 'london' is 'l'.
'war' after 'cod' is 'codwar'.
'l' placed inside 'codwar' is 'COLD WAR'.
'leads to' is the link.
Can you help me to learn more?
(Other definitions for cold war that I've seen before include "State of tension after 1945" , "Intense hostility between nations without actually fighting" , "East West tension" , "Period of East-West political hostility" , "State of hostility (rather than hostilities?)" .)