Gary Neville says Manchester City boss Pep Guardiola now faces "the biggest job that he has probably ever had in football" to win the title back from Liverpool.
And the Sky Sports pundit claims the Reds will have taken a big boost from yesterday's events.
Guardiola's men were on the end of a 5-2 defeat at home to Leicester City.
The scores were level at 1-1 going into the break but Jamie Vardy inspired his side to victory by sealing a hat-trick in the second half.
Neville believes the result could already have a significant impact on the title race.
He said: "[Man City] were so good in the opening 25 minutes but as soon as Leicester broke on them a couple of times, you felt that, psychologically, it just damaged them.
"Some of the wounds from last season are reappearing. The bugs that cost them the title. Certainly, you can get at this Manchester City back four a lot quicker that you could previously. They don't seem to react in transition higher up as they did."
Addressing the challenge for Guardiola now, Neville added: "Is it fair to say that as he stands on the touchline here today with no title last season, he has got the biggest job that he has probably ever had in football at this moment in time, to win the title again.
"He could go two seasons without it because they do look well behind Liverpool compared to what we saw at Stamford Bridge last week."
The Reds take on Arsenal this evening, on the back of the 2-0 win away to Chelsea which Neville mentioned.
And the former Manchester United great sounded a warning over Klopp's charges, despite the campaign still being in its opening stages.
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He said on Sky: "We know the standard that Liverpool are setting. When you think of the business they have done in the last week.
"I know it is early but Liverpool will be watching this [City vs Leicester] game and they will gain in confidence from this. You do.
"It is not that they will be thinking they are going to win the league because City are not at it.
"There is a long way to go but when you see your main rivals losing like this, it just gives you encouragement. It makes you feel stronger."
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