The game ended 1-1 after overtime but superb finishes from Kolbrun Gardarsdottir and April Orongan in the shootout secured the hosts the extra point.
Netminder Emma Nichols impressed once again and made 30 saves, while Ellin Rees was named as GB’s player of the game.
Netminder Emma Nichols was named player of the game as she turned away 41 of the 45 shots she faced, including 18 in the first session.
GB will face Spain, Poland and hosts Iceland in the four-team competition at the Skautahollin Laugardal ice rink.
Netminder Mali Easton will replace Kayla Poole who has had to withdraw because of injury.
One of GB’s brightest young prospects is 17-year-old Cobham-born defenceman Liam Steele, who last month was named on the NHL Central Scouting’s preliminary watchlist.
The GB goalie programme has identified 21 young goalies from across the UK to take part in a series of camps prior to invitations being sent for next year’s GB trials.