Strange tale about island resort (5)
I believe the answer is:
eilat
'resort' is the definition.
(Israeli resort)
'strange tale about island' is the wordplay.
'strange' indicates anagramming the letters.
'about' means one lot of letters goes inside another.
'island' becomes 'i'.
'tale' anagrammed gives 'elat'.
'elat' placed around 'i' is 'EILAT'.
(Other definitions for eilat that I've seen before include "Israel's Red Sea port" , "Israeli Red Sea port" , "Middle Eastern port" , "Red Sea resort" , "city" .)