The setting of the novel in New york city during prohibition provides a conflict that underlies the whole story. What is the conflict?

The setting in The Great Gatsby is present throughout the novel, of course, but it isn't the foundation of the work or the central conflict.  Daisy doesn't reject Gatsby in the end because he's a bootlegger, she rejects him because he "asks too much"--because she will not announce that she never loved Tom--and because she never loved Gatsby in the total, all-encompassing way he thought she did.  She never loved him like he loves her. 

Gatsby is trying to recapture a relationship that never was, a relationship that was an illusion.  That is the central conflict in the novel. 

Gatsby's business is just the means he used to become wealthy enough to compete with Tom, and to get Daisy to notice him and take him seriously.  His business is one part of a means to an end, but the end is recapturing the relationship with Daisy. 

Furthermore, Gatsby's business is used by Tom in an attempt to discredit Gatsby, but with little success.  Gatsby's business conflicts with the idealistic American myth or American dream, but it is not an essential part of why Daisy rejects him.