* Brent oil tops $80 for the first time since late 2014
* U.S. 10-year debt yields hover above 3.1 pct
* Dollar hits highest level in four months vs yen
* Wall St dips, Britain's FTSE 100 at record closing high (Updates with close of U.S. markets)
By Lewis Krauskopf
NEW YORK, May 17 (Reuters) - Yields on benchmark 10-year U.S. Treasuries rose on Thursday to their highest level in about seven years, extending this week's bond market selloff and pushing the U.S. dollar to a four-month peak against the yen.
Oil prices topped $80 a barrel for the first time since November 2014 before pulling back.
Wall Street's main stock indexes slipped, wobbling amid trade jitters as the United States and China hold talks. European stock markets climbed and Britain's FTSE 100 notched a record closing high.
The rising U.S. Treasury yields have been a driver across financial markets this week and come as data shows a strong U.S. economy that could indicate firming inflation
The benchmark 10-year U.S. Treasury note yield rose above 3.1 percent, continuing a surge from earlier in the week.
“I think it’s the same thing we have had really for the past couple of weeks: The inflation trade is being put on,” said Walter Todd, chief investment officer at Greenwood Capital in Greenwood, South Carolina.
The rise in bond rates, the dollar and oil “is being driven by the same backdrop, which is the U.S. economy is hitting on all cylinders,” Todd added.
On Wall Street, the Dow Jones Industrial Average fell 54.95 points, or 0.22 percent, to 24,713.98, the S&P 500 lost 2.33 points, or 0.09 percent, to 2,720.13, and the Nasdaq Composite dropped 15.82 points, or 0.21 percent, to 7,382.47.
The major indexes for the month of May so far are all up more than 2 percent.
The rise in yields "has added a little bit of volatility in markets, no question. But I don’t think it would be enough to derail the recent move in stocks,” said King Lip, chief investment strategist at Baker Avenue Asset Management in San Francisco.
Shares of retailer Walmart Inc and network gear maker Cisco System Inc fell after both companies reported quarterly results, weighing on indexes. Energy shares rose 1.3 percent on the higher oil prices.
U.S. President Donald Trump said that China and other countries had become "very spoiled" on trade, as U.S. and Chinese officials hold high-level talks in Washington on trade ties.
"I think this trade mess is certainly affecting the mood and uncertainty, and it seems to me the market is negative because this whole trade debate with tariffs," said Jim Bell, president of Bell Investment Advisors in Oakland, California.
Strong oil prices helped Britain's top share index, the FTSE 100, seal its highest ever closing level as it climbed 0.7 percent.
The pan-European FTSEurofirst 300 stock index rose 0.62 percent, while Italy's benchmark index bounced 0.3 percent following heavy losses on Wednesday on concerns that a new government could relax fiscal discipline.
MSCI's gauge of stocks across the globe shed 0.01 percent.
U.S. 10-year Treasury yields rose, extending this week's bond market selloff, as traders and investors have not reached a consensus on whether it was time to buy or if the market was vulnerable to more selling.
Benchmark 10-year notes last fell 5/32 in price to yield 3.1131 percent, from 3.095 percent late on Wednesday.
"The market is trying to figure where the bottom is. At this point, it is not clear," said Mary Ann Hurley, vice president of fixed income with D.A. Davidson in Seattle.
The dollar index, which measures the greenback against a basket of major currencies, rose 0.1 percent. The Japanese yen was flat versus the U.S. currency at 110.79 per dollar.
Concerns that Iranian exports could fall because of renewed U.S. sanctions, reducing supply in an already tightening market, drove oil above $80 a barrel for the first time since November 2014.
Brent settled up 2 cents at $79.30 a barrel, after rising as high as $80.50. U.S. crude settled flat at $71.49 a barrel.
Additional reporting by Richard Leong and Stephen Culp in New York; Editing by James Dalgleish and Leslie Adler