In this paper, we present a nodal hydraulic head estimation methodology for water distribution networks (WDN) based on an Unscented Kalman Filter (UKF) scheme with application to leak localization. The UKF refines an initial estimation of the hydraulic state by considering the prediction model, as well as available pressure and demand measurements. To this end, it provides customized prediction and data assimilation steps. Additionally, the method is enhanced by dynamically updating the prediction function weight matrices. Performance testing on the Modena benchmark under realistic conditions demonstrates the method's effectiveness in enhancing state estimation and data-driven leak localization.