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* TSX falls 169.09 points, or 1.33 percent, to 12,591.21 * All 10 main index sectors decline * Gold miners drop sharply despite bullion gains * BMO rises after results; Scotiabank slips By John Tilak TORONTO, Aug 27 (Reuters) - Canada's main stock index recorded its biggest single-day percentage decline in more than two months on Tuesday as the likelihood grew that the West will launch a military strike against the Syrian government. Concern over the fallout from poison gas attacks by the Syrian government took the market spotlight away from two of the country's biggest banks, Bank of Montreal and Bank of Nova Scotia, which reported quarterly earnings that topped expectations. Sharp gains in commodity prices also failed to boost sentiment. The uncertainty about Syria fueled a rush to gold, a perceived safe-haven asset, and bullion prices hit a three-month high. Oil prices surged to a six-month high as any instability in the Middle East would create supply problems. Despite its resource-heavy composition, every major sector on the index ended in the red. The United States and its allies could attack Syria within days, Western envoys have told rebels fighting President Bashar al-Assad. "There are a few negative vibrations in the market," said Michael Sprung, president of Sprung Investment Management. "Turmoil in the Middle East could cause a spike in oil prices, which could result in a slowdown in economic activity." "Investors should be looking for opportunities as some of the better companies sell down, opportunities to buy in and increase the quality of the holdings in their portfolio," he added. The Canadian market, which hit a three-month high the previous session, reflected weakness across world stock markets spurred by worry over Syria. The Toronto Stock Exchange's S&P/TSX composite index closed down 169.09 points, or 1.33 percent, at 12,591.21, its biggest drop since June 20. The materials sector, which includes mining stocks, fell 3.7 percent, with gold miners losing more than 4 percent. Goldcorp Inc slipped 4.6 percent to C$31.35, and Barrick Gold Corp was down 4.1 percent to C$20.64. Energy shares were little changed as gains in the oil price benefited some producers. Canadian Natural Resources Ltd rose 1 percent to C$31.74, and Suncor Energy Inc climbed 0.8 percent to C$36.11. Financials, the index's most heavily weighted sector, lost 1.1 percent. Toronto-Dominion Bank fell 1.3 percent to C$87.82. Shares of Bank of Montreal hit a 52-week high after the company said its third-quarter profit rose 17 percent, benefiting from higher insurance income and lower provisions for bad loans. The stock eased back from its high and closed up 0.4 percent at C$66.05. Bank of Nova Scotia posted a slightly stronger-than-expected quarterly profit and raised its dividend. Its stock slipped 1.7 percent to C$57.71. "(The results) foster the reputation that Canadian banks have had, that they're a pretty safe place to invest your money, with regular dividend increases and higher profits," said Fred Ketchen, director of equity trading at ScotiaMcLeod, who owns shares of both Scotiabank and BMO.