Penetrating wound observed in AE (5)
I believe the answer is:
acute
'penetrating' is the definition.
(I know that penetrating can be written as acute)
'wound observed in ae' is the wordplay.
'wound' becomes 'cut' (cut is a kind of wound).
'observed in' indicates putting letters inside.
'cut' put into 'ae' is 'ACUTE'.
(Other definitions for acute that I've seen before include "Excruciating" , "(Of an angle) less than 90 degrees" , "Sharp like angle" , "Short and severe" , "Perspicacious" .)