Setting's Influence on Mood

Read the following excerpt and answer the question that follows:

In the small town of Elmswood, where the cobblestone streets wound through an array of quaint shops and cozy homes, the winter frost clung to the windows like an artist’s canvas, obscuring the life's warmth within. As snowflakes danced lazily from the grey sky, their descent seemed to slow time itself, casting a hushed serenity over the bustling marketplace that usually thrived with vibrant chatter. On the outskirts of town, the dense woods stood as a silent guard, their branches heavy with snow, intertwining with the town’s heartbeat, both tranquil and foreboding.

Which of the following best describes how the setting contributes to the overall mood of the excerpt?