It does look as if the Croat was hit on the face or shoulder area by nothing stronger that a falling snowflake. The camera angles don't help. What we can see is that the ref had an excellent view of the incident, the Croat had got in front of the defender, the ball was at his feet for that nanosecond with only the goalkeeper to beat and he swings or is swung backwards for some reason. The ref pulls out the red and the defender holds his head. Nobody protests.
It all tells me that the Iceland defender did enough to make the Croat lose his balance, that's what the ref saw and he was very restrained with dishing out cards during the game. The ref had certainty.
I have to say, Modric is an outstanding professional, he hadn't his best game but not for lack of effort and is willing to take on more than his job calls for, in fact he tried too hard. He was the player who was covering the Iceland attacker when he went down on his ankle, Modric then had possession of the ball and had a clear path for a breakaway move but instantly, with no hesitation, hit the ball over the sideline.
BTW, the peculiar quirk with that news item report on the game, the news was that Icelanders actually sung the anthem out loud at a football match.
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