Whisk the warm water, yeast, and sugar in a medium bowl. Let stand until foamy, about 10 minutes.
Combine the flour, oil, salt, egg, yeast mixture, and the vanilla or almond extract in the bowl of a stand mixer fitted with the dough hook. Mix on low speed, scraping the bowl occasionally, until the dough comes together in a firm, stretchy mass, about 5 minutes.
Optional Step: Divide the bread dough to create swirl. Remove 1/3 for the colored bread swirl. Add your choice of food coloring and knead until thoroughly dispersed. For the remaining 2/3 of bread dough, gradually knead sprinkles, alternating between sprinkles and kneading until you have achieved the desired result. (Knead, add sprinkles, knead, add sprinkles, knead, add sprinkles.) Be extremely gentle! Some sprinkles are better suited to this than others. If you are too rough, they will dissolve from the moisture of the bread dough and become muddy.
Allow the two dough balls to rise for approximately 1 hour in separate, oiled bowls.
Line a half sheet pan with parchment paper or a silicone mat.
Roll both portions of dough out to the same dimensions. Layer the sprinkle bread dough onto the colored bread dough. Gently roll the two layers of dough together until you get a beautiful, free-formed loaf of bread dough. (Tip: If you are concerned about the two layers of bread not sticking together, a very light brushing of water can help them stick.)
Once the bread is rolled, place it seam side down on the lined baking tray. Cover with a clean kitchen towel and allow loaf to rise in a warm place until the volume has increased by about a third, roughly 45 minutes.
Position a rack in the center of the oven and preheat the oven to 400°F.
Make egg wash and brush the entire exterior of the bread dough. Gently slash the top of the bread in your desired pattern to allow for expansion while it is baking. You'll be able to go deep enough that it reveals the sprinkled bread swirl inside the slashes. (Optional: You may sprinkle the exterior of the bread with more sprinkles. Be warned, however, that they could become slightly sticky the day after it has been baked, due to humidity.)
Bake until the loaf is browned and well risen, approximately 20 minutes. With a temperature probe, the internal temperature of your loaf will be 190°F.
Cool your bread completely on a wire rack before slicing. If you don't resist the temptation, you'll risk mashing the perfect swirl or creating clumpy crumbs. Enjoy!