Near sunrise or sunset, sunlight travels through more atmosphere, where it can bend, scatter, and form unusual glowing shapes. Temperature differences above the sea can distort distant objects even further.
The brain also plays a role, quickly turning shifting light and brightness into recognizable shapes that may seem solid or even moving.
So the strange sight above Ikaria may have been nothing more than nature combining light, air, moisture, and perception to create something that looked almost otherworldly.