The setting can set the tone of the story, but the tone must match the action. A Gothic horror story rarely takes place in a one-bedroom stone cottage by the sea. That’s not to say it couldn’t, but it would be more effective in a different sort of house. That’s not to say that you are locked into certain settings for a particular genre, but making your setting fit into the story just makes it work better.
Setting doesn’t have to be a simple backdrop. There are ways to use your setting to add suspense and conflict to your story. A snowstorm can make it hard to leave a dangerous situation. That adds tension and suspense to the story. A severe storm at sea can endanger a ship. These are just a few ideas on how to use your setting as a way to affect your story’s action.
Play with your setting. See if it is just a static backdrop or if it can add drama or even comedy to your story. If you can change the setting without changing the story, your setting is just a backdrop. If you have to change the story when you change the setting, you might be able to use your setting to affect your story’s action. If you have a hole in your plot, see if your setting can help you plug it. Sometimes all you need is a little bit of set to get in the way to make a story work. Have a character get into an accident because of icy or slippery conditions. Have a character be snowbound and unable to escape. I once had a character in a chase on the side of a mountain. Falling rocks can be a problem or a salvation. You never know what you can do unless you look hard at your setting. Have fun with your story’s location and see if it can solve a plot problem. Good luck.