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Yesterday I could view 4k youtube clips if I wanted to but after today's update, I can't pick higher than 720p. Did they lock the YouTube resolution to the screen resolution?
That's not accurate, first, your phone doesn't have a 4K display, only the Z5 Premium does, second, this is a Youtube restriction, not even the Z5 Premium can access 4K video content on youtube.
I have multiple Xperias, from the X10 to the X and I have never seen that option to watch a video on 4K on any of them.
Youtube's 4K resolution is 4096 × 3072 or 3,840 x 2,160 at 60fps but this might different in certain regions.
4K UHD is a resolution of 3840 pixels × 2160 lines
Ultra Wide Television 5120 × 2160
But do contact Youtube on this