The Newcastle striker has been outstanding this season, breaking records and leading their push for a top-four finish.
Carragher feels Liverpool, potentially losing Mohamed Salah and Darwin Nunez this summer, could challenge the Gunners for Isak, despite Newcastle insisting he’s not for sale.
The Sky Sports pundit said on the It's Called Soccer! podcast: "I don't really get all the talk about going to Arsenal. I know Arsenal would love him, but one thing I would say as well, Arsenal aren't the only team that need a centre-forward. Liverpool need one as well.
"I think in the summer, Liverpool will be in the market for a centre forward. So I think if he was available, there's no doubt Arsenal would go for him, but I think Liverpool would be part of that queue as well.
"The problem you've got with Real Madrid is they've got (Kylian) Mbappe, Barcelona I'm not sure have the money - but they probably would be in the market for a centre forward because you think of the age of (Robert) Lewandowski, but if he's to leave Newcastle, he has to go to a team that has a realistic chance of winning the Champions League because that's how good he is."