Many essential oils are toxic to dogs, especially in concentrated form.
Tea tree, peppermint, cinnamon, and pine oils are particularly dangerous. Diffusers can also irritate.
Essential oils are highly concentrated plant extracts containing volatile organic compounds (VOCs). Dogs are significantly more sensitive to these than humans due to their smaller size, thinner skin, and differences in liver metabolism (dogs lack certain glucuronidation enzymes). Tea tree (melaleuca) oil contains terpinen-4-ol and other terpenes that are directly hepatotoxic and neurotoxic to dogs. Peppermint, cinnamon, pine, wintergreen, and clove oils are also particularly dangerous. Even diffused oils can irritate the respiratory tract.
Sources
Tea tree oil: toxic effects have been reported at dermal application of just 0.1-0.3ml/kg. Never apply undiluted essential oils to a dog. Ingestion of even a few drops of concentrated essential oil can cause drooling, vomiting, tremors, and respiratory distress. Oil diffusers in enclosed rooms can cause respiratory irritation. Always ensure the room is well-ventilated and the dog can leave.