It's All About Commodities.(Global Investor)

Byline: Ruchir Sharma; SHARMA is head of emerging markets for Morgan Stanley Asset Management.

For much of the past decade, the emerging markets ofaBrazil and Turkey were considered identical twins.aFollowing their long history of high indebtedness and hyperinflation, which led them to the edge of the abyss in 2002, both economies embarked on a path of structural reform and staged remarkable recoveries. They appeared to share a common destiny, with their stock markets and currencies trading in sync. Till oil did them part.

The commodity-price explosion led by oil since late 2007 separated the fate of resource-rich Brazil, and resource-poor Turkey. Their divergent paths are symptomatic of the way the world has been operating this year. The only axis around which the global economy revolves is oil. In the first half of 2008, stock markets of most oil-exporting countries soared to new highs, while those of oil importers plunged 15 percent on average.

Brazil has been a significant beneficiary of the oil-obsessed world;acommodities account for nearly half of its exports. Turkey, in contrast, is one of the worst-performing markets this year due to an extremely large oil-import bill and no other major commodity export to offset the oil shock. The market value of the Brazilian oil giant Petrobras is now larger than the entire market capitalization of Turkey. Within the developed world, too, the performance gap between energy stocks and the rest of the market is massive. In fact, today's outperformance in the energy sector has surpassed that of the 1970s. The only other time one sector was able to pull so far away from the broader market was in early 2000, when tech stocks topped the league tables.

But oil could sow the seeds of its own destruction. The price surge is causing a widespread inflation problem, even in oil-exporting countries. It's telling that the markets of Brazil and Russia haveaover the past several daysajoined the global bear run. In the United States, shares of energy companies are declining despite forecasts of ever-rising oil prices.

The message from the marketplace is that oil and other commodity prices have reached a point where they are choking economic growth. While the commentariat is fretting over inflation, it's interesting to note that market indicators most sensitive to inflation are rather well behaved.aGold prices have for many months been locked in a narrow trading range, with the ratio of gold to oil prices at a record low. This suggests that high oil prices are acting more as a tax on ...