Unstable volcanic crater encircles island (7)
I believe the answer is:
erratic
'unstable' is the definition.
(I've seen this before)
'volcanic crater encircles island' is the wordplay.
'volcanic' is an anagram indicator (letters disrupted as if by a volcanic eruption).
'encircles' indicates putting letters inside.
'island' becomes 'i'.
'crater' anagrammed gives 'erratc'.
'erratc' going around 'i' is 'ERRATIC'.
(Other definitions for erratic that I've seen before include "Inconsistent, shifting" , "Mercurial" , "Variable" , "Deep affection" , "Wild" .)