The Battle of Seven Oaks occurred in the context of intense rivalry between the North West Company and the Hudson's Bay Company, which were two of the leading fur trading companies in North America during the early 19th century. By the year of the battle, these companies had been competing for dominance in the fur trade for several decades. The Hudson’s Bay Company held a charter from the British crown that granted it extensive rights to trade within the watershed of Hudson Bay, while the North West Company operated primarily from its base in Montreal, seeking to expand its territories westward.

The immediate cause of the battle stemmed from a series of aggressive moves by both companies to secure trading territories and establish their influence over local Indigenous populations. In 1816, tensions escalated when a North West Company brigade led by Scottish fur trader Thomas Douglas, the 5th Earl of Selkirk, clashed with Hudson's Bay Company employees in a struggle for control over trading posts.

On the day of the clash, a confrontation occurred near Fort Gibraltar, leading to a skirmish that became known as the Battle of Seven Oaks. The North West Company's forces, better organized and prepared for conflict, successfully overwhelmed the Hudson's Bay Company’s personnel. The event not only underscored the competitive nature of the fur trade but also highlighted the impact of European colonial interests on Indigenous populations and their traditional trade routes. The aftermath of the battle had lasting implications for the fur trade industry and territorial disputes in Canada.