The most common and most likely answer to this crossword clue is the 7 letter word GRENADA
I've seen this crossword clue in The Daily Telegraph
G
R
E
N
A
D
A
More clues leading to the result GRENADA
- At heart, regrets nothing in Spanish island
- Explosive device briefly associated with a Caribbean state
- Greek and a Scandinavian heading west to W Indies location
- Island emigre’s half-eaten duck
- American in danger transferred from island
- Rock garden on a Caribbean island
- State of danger possibly covering area
- Bomb almost finished advanced country
- Spanish city with eyes initially for a part of the Caribbean
- Reagan planned to seize diamonds from an island in the Caribbean
Buddy explains!

The straight part
We know that "an island in the Caribbean" is the straight/definition part of the clue. The straight part is often a synonym or definition, in this case an island in the caribbean = grenada.The cryptic/wordplay part
In cryptic crossword there's often an wordplay/cryptic part as well.This part involves a more complex hint, such as an anagram, homophone, hidden word, etc.
Sadly, We don't have an explanation for this specific crossword clue yet.