Having started all three Tests when the Lions faced New Zealand in 2005, Peel had been hoping to enhance his claims for a second successive tour spot with a positive performance for Wales against Italy this Saturday.
Instead, the 28-year-old former Scarlets No9 will play no further part in his country's Six Nations campaign.
"It's a huge blow for Dwayne and his Lions hopes," said 1997 and 2001 tourist Jenkins, who played a significant part in a stunning Lions victory the last time they toured South Africa.
"It's been hard for him to come back into the squad and he would have loved to have played this weekend and a week later against Ireland.
"And, with the number of injuries he has had, he must be devastated.
"Dwayne has a contract with Sale but of course we would have liked him not to play. Maybe in the future the players will have a look at that."
Peel, who would have been starting his first international in a year against the Azzuri, has been replaced in the Welsh side by fellow Lions contender Mike Phillips.