Were I to venture a guess, its likely vestiges of an enemy zone from an alpha version dungeon they scrapped. Judging by overworld enemy toughness, it was likely intended to be accessed post-Sealed Cave, or at least when the underground opens up for travel. Rather than have a bunch of pointless traversable land, they turned most of it into a lava lake.
Ff4 really had a lot of amazing, inscrutable mechanics and secrets: finding the single room with Pinkpuffs on the moon (in a single nondescript room with a Cabin iirc) with a 1 in 64 encounter rate and getting them to drop a 1 in 64 pink tail. Summons being droppable (imp, cockatrice, bomb, etc.). Random super-rare equips you may not see in multiple runs like the Medusa Sword or Lilith Rod, or the Artemis Bow. They went full-on mmo in their drop rates on this game.
I still remember trying to get a perfect file in that game. (all adamant armor party) ... I failed. ---