When Germany invaded Denmark in 1940, Britain occupied Iceland, a nominally independent state that Denmark was in union with. As part of FDR’s Lend-Lease Act in early 1941, US Marines occupied Reykjavik in order to free British troops for operations in North Africa.
In the latter half of 1941, the US Navy in the Atlantic was taking an increasingly active role in defending convoys against U-Boats despite no declaration of war between the US and Germany. After the “Greer Incident” in early September (the first time a U Boat fired on a US ship and vice versa) FDR issued a “shoot on sight” order for all German ships in the Atlantic. By October, it was common practice for the US Navy to escort convoys as far as Iceland before turning them over to the Royal Navy.
On 16 October 1941, a German wolfpack attacked a British convoy SC-42 (from Sydney, Canada to Liverpool, England) off of Iceland and overwhelmed the Canadian escorts. After losing nine merchantmen, the convoy commander requested the assistance of the USS Kearny and three other American destroyers docked at Reykjavik. All evening the four destroyers dropped depth charges on the German U-boats, possibly sinking one, and saved the remainder of the convoy.
But the Germans weren’t finished. Just after midnight on the 17th, U-568 fired a spread of torpedoes and one hit the Kearny killing ten sailors and wounding more than twenty. The Kearny managed to control the damage and make it back to Iceland and eventually Boston. The casualties in the Kearney Incident were the first American deaths in the undeclared war against Germany, more than six weeks before Pearl Harbor.