TORONTO (Reuters) - The Toronto Stock Exchange's main index slumped more than two percent yesterday, dragged down by resource issues as oil and gold prices dropped, while gloom over the outlook for economic growth hurt the wider market.

Oil and gas companies led the descent, stung by a drop of nearly $4 in crude amid signs of easing tensions with Iran over its nuclear program.

But with the price of oil remaining high - it is up more than 40 percent this year to above $141 a barrel - intensifying worries over its impact on consumer spending and the economy took the broader market lower.

"We're more and more digesting the fact that oil is a key ingredient and it's very hard to grow an economy with oil at $140 or thereabouts," said Adrian Mastracci, portfolio manager and president at KCM Wealth Management Inc. in Vancouver.

"It's simply just an uphill battle to do that, so the bears are out today and they're out in full force."

The S&P/TSX composite index closed down 297.59 points, or 2.12 percent, at 13,712.8, with all but one of its 10 sectors pointing lower.

It was the first time the benchmark has closed in negative territory for the year since the end of April.

The Toronto benchmark has fallen 9.5 percent from the record high reached at the beginning of June, putting it on the cusp of an official correction, traditionally defined as a 10 percent fall from the peak level.

The energy and materials sectors shed 3.9 percent and 1.7 percent respectively. In the oil patch, Canadian Natural Resources was down C$3.47, or 3.6 percent, at C$92.34, and EnCana lost C$4.28, or 4.8 percent, to C$84.60.

The gold producers sub-index was down 2.2 percent, alongside a slide in bullion prices. Kinross gold was off 59 Canadian cents, or 2.6 percent, at C$22.59.

On the upside, Petaquilla Copper's shares more than doubled, up 98 Canadian cents at C$1.94 after its joint venture partner Inmet Mining said it would make an all-cash C$320 million ($314 million) bid for the company.

Inmet edged up 99 Canadian cents, or 1.6 percent, to C$64.51.