That would be a leaking axle seal.
requires pulling the caliper and hub off that side, sliding the axle out, and taking off the CAD (Center Axle Disconnect). The seal is inside the CAD just to the right side of the opening.
'87 YJ, 4.2L built and bored, 8.5" of lift, 8.8 rear, AX15/NP 231, Tom Woods drive shafts, Flat fenders, 12,000LB winch, Custom bumpers, Rattle can paint job. Never completed...