Parasites found in central Iceland (4)
I believe the answer is:
lice
'parasites' is the definition.
(lice are parasitic insects)
'in central iceland' is the wordplay.
'in' indicates the answer is hidden within the clue.
'LICE' is hidden within 'central iceland'.
'found' is the link.
(Other definitions for lice that I've seen before include "Bloodsucking parasitic insect" , "Crawlers" , "Parasitic insects" , "Wingless bloodsucking parasites" , "Bloodsucking insects" .)