τό οἱ ὑπὸ λαπάρην τέτατο μέγα τε στιβαρόν τε
Since it's at the beginning of a hexameter, τό needs to scan heavy.
And since omicron is always short by nature, it must be heavy by
There are actually more than two possibilities, since there are several cases in which a short syllable is treated as long even when it does not make position.
In this particular case, I think there are two possible answers. First, Allen Rogers Benner says:
The initial syllable of the first foot is sometimes lengthened apparently by the ictus alone. E. g. 3.357, “διά”. X 379, “ἐπεί”.
I personally think this is not the likely reason in this case, because the examples cited are all two-syllable words that frequently need clause and sentence initial position for syntactical reasons. Banning such words from beginning verses would cramp a poet's style. The pronoun τό, however, is not clearly needed in clause/sentence initial position.
The second possible answer has two parts, which Allen Rogers Benner describes this way:
A short final vowel may make a long syllable when the next word begins
with a liquid λ, μ, ν, ρ—or digamma, or sigma. E. g. A 233.
In many instances where a short syllable seems to be used for a long,
closer examination shows that it is really long by position. The value
of a consonant (especially digamma) often remains, even when the
letter itself has disappeared from the text. E. g. A 416. So too 3.2,
230, etc. Whether the initial consonant of “ὡς”, ‘like,’ was “ϝ” or y
is uncertain. At any rate, it had disappeared in the Homeric age; its
value was retained, however, in formulas like the one quoted, which
were inherited from older time.
Allen Rogers Bennet, in his notes to the Iliad, cites this last explanation for the line in question. Apparently οἱ descends from Proto-Indo-European *yós, which would have yielded an initial "y" (/j/) in proto-Greek and perhaps down into the time this poetic formula was first devised. Since "y" (/j/) has phonetic features similar to digamma, it apparently could be doubled after a short vowel according the first rule above, making the short vowel long by position as you surmised.
If this doubling of liquids, sigma, digamma and "y" (/j/) is indeed the explanation, it is notable that this verse unusually contains three instances of such doubling, with the initial original consonants of: οἱ, λαπάρην, and μέγα.