A left-hand corner midway through the wet 14km stage 1 time trial was also the site of a serious crash for Alejandro Valverde who joined Izagirre as a DNF. Orica-Scott's Luke Durbridge also fell on the corner, injuring his ankle with his injury to be assessed ahead of starting two.
Izagirre came into the Tour as the outright GC rider for Bahrain-Merida who make its debut at the French Grand Tour in 2017.
A release from the team explained the accident and medical treatment for Izagirre post-crash and how his absence will affect the team in July.
"Izagirre was then immediately transported to the hospital by an ambulance in company with the team doctor Luca Pollastri. The first diagnosis said that Ion Izagirre has an unstable lumbar fracture and he needs a surgical treatment. We will come with further information in the next days," read the statement.
"We are deeply sad that Ion will not continue this year's Tour de France, where he was meant to be the team leader after the strong performance this season. It is a big loss for Team Bahrain-Merida. All riders and staffs will put heads together, and bite into the further challenges of Tour de France."
A stage winner at last year's Tour with Movistar, the 28-year-old has enjoyed a successful start build up to the race with top-ten results at Paris-Nice, Vuelta al Pais Vasco, Tour de Romandie and Tour de Suisse. Izagirre also enjoyed a consistent Ardennes campaign with seventh at Amstel Gold, 12th at La Fleche Wallone, followed by fifth at Liège-Bastogne-Liège.
Sonny Colbrelli was the best rider for Bahrain-Merida on stage one with the sprinter finishing in 23rd place. He was the only rider to finish inside the top-100 for Bahrain-Merida.
The team is likely to readjust its ambitions for the Tour with the likes of Colbrelli and Janez Brajkovič to take on greater leadership roles.
In its debut Grand Tour, Vincenzo Nibali won a stage and finished third overall at the Giro d'Italia in May.