CANADA STOCKS-TSX falls more than 2% as precious metal prices slide

By Fergal Smith

March 3 (Reuters) - Canada's main stock index fell sharply on Tuesday, led by declines for the high-flying materials sector, as investors globally worried about the prospect of an extended Middle East conflict that could stoke inflation.

The S&P/TSX composite index .GSPTSE ended down 756.33 points, or 2.2%, at 33,784.94, pulling back from a record close on Monday.

The index ended well above the day's low. Still, the decline was the biggest since February 12.

"I don't think the notion of an extended war that would last more than a week or two was priced into the market, and I think today (Tuesday) was the realization this could last a while," said Colin Cieszynski, chief market strategist at SIA Wealth Management. "We got caught in a global market sell-off, and on top of that we had a big correction in precious metals, and the mining sector is what's really dragging on the TSX today."

The materials group .GSPTTMT, which includes metal-mining shares, dropped 7.2%, giving back some recent sharp gains. The price of gold XAU= was down 4.3% as the U.S. dollar benefited from safe-haven demand and dimming prospects for Federal Reserve interest rate cuts.

The price of oil, a major driver of inflation, settled 4.7% higher at $74.56 a barrel but energy .SPTTEN ended 0.5% lower.

Heavily weighted financials .SPTTFS lost 1.3% and industrials .GSPTTIN ended 0.9% lower.

The biggest decliner was Pet Valu Holdings PET.TO. Its shares fell 10.9% after the company reported fourth-quarter results.

Technology was the only one of 10 major sectors to end higher. It rose 1.2%, helped by a gain of 4.9% for Constellation Software CSU.TO.