Vatnsleysið hófst í morgun.

The dictionary form is vatnsleysi.

It is a compound:

• vatns- = of water (from vatn, water)
• -leysi = lack / absence

So the word literally means lack of water. This -leysi ending is a common Icelandic pattern for making nouns that mean lack of X.

Because the first part of the compound uses the genitive singular form of vatn.

• nominative: vatn = water
• genitive: vatns = of water

So vatnsleysi is literally water's lack or lack of water.

This is very common in Icelandic compounds: the first noun often appears in a genitive-like linking form.

That -ið is the definite article attached to the noun.

So:

• vatnsleysi = water shortage / lack of water
• vatnsleysið = the water shortage / the lack of water

Icelandic usually adds the to the end of the noun instead of using a separate word like English does.

It is neuter.

That is useful to know because many nouns ending in -leysi are neuter, and that helps explain forms like vatnsleysið with the neuter definite ending -ið.

Hófst is the 3rd person singular past tense of hefjast.

So:

• hefjast = to begin / to start
• hófst = began / started

It is an irregular past-tense form, so it does not look especially close to the dictionary form. This is something learners usually just have to memorize.

Because hefjast is the intransitive / middle-voice verb, meaning that something begins.

Compare:

• hefja = to begin/start something
• hefjast = to begin/start

So in this sentence, the water shortage is not starting something else; it is the thing that begins, so hófst is the right form.

It is a time expression meaning this morning.

Here, í is followed by morgun, which is an accusative form in this expression. Icelandic often uses set prepositional phrases for time.

A useful contrast is:

• í morgun = this morning
• á morgun = tomorrow

So learners need to be careful: changing the preposition changes the meaning completely.

Yes. Icelandic word order is more flexible than English word order.

The original sentence is:

• Vatnsleysið hófst í morgun.

But you could also say:

• Í morgun hófst vatnsleysið.

That sounds natural too, especially if you want to emphasize when it started.

The important thing is that in a main clause, Icelandic usually keeps the finite verb in second position. So if Í morgun comes first, hófst still comes second.

Yes. It sounds natural, especially in news, announcements, or formal everyday language.

A speaker might also use a more straightforward verb like byrjaði:

• Vatnsleysið byrjaði í morgun.

That would also be perfectly natural. Hófst is slightly more formal or written in tone, but still very common.