In dreams an island can signify a spiritual retreat – somewhere which is cut off from the world – which will allow us to contemplate our own spiritual self.
Psychological / emotional perspective:
Occasionally we all need to recharge our batteries, and to dream of an island can help, or warn us, to do this.
Dreaming of a desert or treasure island indicates there is something to be gained by being alone and exploring our ability to cope with such a situation. We may actually function better in some way.
Dreaming of an island signifies the loneliness one can feel through isolation, self-imposed or otherwise. We may feel out of touch with others or with situations around us.
An island can also represent safety in that, by isolating ourselves, we are not subject to external pressures.