* U.S. judge wants to know if U.S. prepared to shut UBS

* Analysts see increased chance of deal before hearing

* Do not expect U.S. to close UBS down in United States

* Shares close up 2.9 percent in Europe (Adds comments from US lawmaker, industry expert)

By Lisa Jucca

ZURICH, July 9 (Reuters) - Investors bet on Thursday the United States would not go as far as shutting down UBS AG (UBSN.VX: Quote, Profile, Research) there in a tax dispute, instead expecting the Swiss bank to be hit by a hefty fine as part of a swift out-of-court settlement.

UBS's shares were higher after a U.S. judge late on Wednesday ordered the U.S. government to say if it was prepared to seize the bank's assets in the United States, and were roughly in line with the European bank sector.

U.S. District Judge Alan Gold, set to preside over a court hearing next week in a suit seeking to force UBS to disclose 52,000 secret account holders, gave the Justice Department until noon EDT (1600 GMT) on Sunday to reply.

"This is shaping up to be a battle royal," said Raymond Baker, director of Global Financial Integrity, a think tank that that follows illegal financial flows. "My hope is that the U.S. hangs tough."