* Brent drops back jumps to a four-year high

* ECB expected to hold rates but talk tough shortly

* Hawkish Fed pushes up dollar and global bond yields

* Apple ( AAPL ) results due on Thursday on Wall Street

(Updates throughout after markets u-turn, BoE holds rates)

By Marc Jones

LONDON, April 30 (Reuters) - European markets performed

a sharp U-turn on Thursday as oil prices plunged after hitting a

four-year high, UK gilt yields dropped after the Bank of England

held interest rates and a jump in the yen prompted speculation

about foreign exchange intervention.

With a European Central Bank rate decision and earnings from

iPhone maker Apple ( AAPL ) still to come, and a report suggesting U.S.

President Donald Trump will be briefed on options for more

strikes on Iran, it was another breathless session.

The biggest mover was Brent which dropped back to $113 a

barrel, having surged as high as $126 overnight on concerns that

a prolonged conflict in the Middle East could choke oil supplies

for months.

The Japanese yen surged 2% following stark warnings from

Tokyo officials, including the finance minister, that

intervention to prop up the currency could be imminent.

It pushed the dollar down 2.1% to below 157 yen, putting the

U.S. currency on track for its biggest one-day drop against the

yen since last August, when it fell 2.25%.

Japanese Finance Minister Satsuki Katayama had said earlier

that the timing to take "decisive action" in the market was

nearing, in her strongest signal yet of potential currency

intervention to prop up the sagging currency.

Rate-sensitive 2-year UK Gilt yields fell over 10 basis

points as the BoE kept interest rates at 3.75% in a resounding

8-1 vote that dampened expectations that it might have been

tempted to hike.

"This shock will induce a trade-off between higher inflation

and softer output, and the appropriate policy response is state

contingent," BoE Governor Andrew Bailey said, referring to the

Iran war-related spike in oil prices.

The European Central Bank was due to announce its latest

rate decision, with bets that it will be considering a rate hike

soon, albeit not this month.

There had been a hawkish shift in tone from the U.S. Federal

Reserve as it left rates on hold on Wednesday that had triggered

a selloff in the bond markets - which in tandem with the oil

price, was only now reversing.

The 2-year UK gilt yields were back below 4.5%,

while 2-year German yields - which are sensitive to

near-term ECB rate changes - looked set to snap an 8-day run on

gains.

AXIOS SAYS TRUMP TO BE BRIEFED

AXA's chief economist, Gilles Moec, said everything centred

on worries about the U.S.-Israeli war against Iran.

News site Axios quoted unspecified sources as saying Trump

would on Thursday receive a briefing from the leader of the U.S.

Central Command, ​Brad Cooper, on new plans for potential

military action against Iran.

Negotiations have stalled and Axios said Washington hopes

⁠to make Iran more flexible at the negotiating table on nuclear

issues.

"The inflation shock is significant and probably going to

last longer than expected and at the same time the damage to the

economy is going to be higher," Moec said.

"This is playing into the hands of the hawks," he said,

referring to central bankers calling for higher interest rates

to prevent further inflationary problems.

The day's swing in oil prices was over 10 percentage points.

Brent was last at $113 a barrel and down almost 4% having been

as high as $126.41 overnight. It is still nearly double the

price it started the year at.

The rally in Japan's yen came after it had

breached the key 160 threshold. Investors have built up the

biggest short yen position in nearly two years, data shows.

Overnight, the yield on 10-year Japanese government bonds

had climbed to 2.5%, the highest since June 1997.

EYES ON APPLE

Investors were also gearing up for earnings from iPhone

maker Apple ( AAPL ) later as part of what has already been a

frenetic week of 'Big Tech' reports.

Google parent Alphabet's shares had leapt 7% in

extended Wall Street trading on Wednesday after it beat

forecasts. Microsoft ( MSFT ) and Amazon's ( AMZN ) were also

solid although Facebook and Instagram owner Meta

tumbled 7% on its plans to plough billions more into AI and

datacentres.

Attention was also on what the ECB will soon signal,

especially after Wednesday's shift in tone at the Fed.

Three of the U.S. central bank's board members voted to drop

the easing bias in its policy statement in the most divided

decision since 1992.

Outgoing Chair Jerome Powell confirmed he would stay on as a

governor for now to defend the institution's independence as his

successor Kevin Warsh, picked by low-rate advocate U.S.

President Donald Trump, moves toward confirmation.