Isak missed preseason as he forced a move away from Newcastle and then suffered a double leg fracture before Christmas.
Shearer told Betfair: "The Isak transfer has been disastrous for Newcastle, Liverpool, and himself.
"It really has not worked for any party. The money they paid out for him was a good fee that Newcastle got, but it just hasn't worked for all three parties.
"I do not know the extent of how his injury has affected him or how much it has hurt him mentally this year.
"He looks like he will be fit for the World Cup with Sweden, and on paper, their forward line of (Viktor) Gyokeres, (Anthony) Elanga, Isak and (Dejan) Kulusevski looks decent.
"But until we know where he is mentally and physically, it is a hard question to answer whether he will be ever be as good as he was at Newcastle. It's a lot to take on, what's happened to him this season."