The 25-year-old is said to be “adamant” he won’t play for Newcastle again as he pushes for a move to Premier League champions Liverpool.
Liverpool had a British record £120 million bid for the Sweden international turned down by Newcastle, who remain reluctant to sell.
Speaking to the BBC, Howe admitted that he doesn’t believe the speculation surrounding Isak’s future has been helpful this pre-season.
"I don't think it's been healthy for us," Howe said. "I don't deny that's been a big challenge.
"Alex, for me, is one of the best strikers in the world - if not the best. To miss him from your squad leaves a huge gap.
"I think morale was certainly affected early on during pre-season. There was nothing I could do to affect that - it was always going to be there.
"When you have a player that good who is not part of your group, it's difficult for the players to fully understand it and to know what's going on and how to react.
"But, as time has gone on, there has been an acceptance this is the squad, and we have got to make the best of the situation. That's always been my train of thought.
"Whatever situation you're in, you have got to find a way, and you can only control what you can control. We have moved forward, and I've got to say the atmosphere of the group has been very good in the last couple of weeks."