In fact, high inflation triggered mass protests in December and January, prompting the regime to massacre tens of thousands of its own citizens. President Donald Trump warned Tehran against further violence and began a military build-up that led to the current conflict.

Inflation has worsened and apparently is so bad now the government issued its largest-ever currency denomination: the 10 million rial note (equivalent to about $7).

The new currency went into circulation last week, according to the Financial Times, and comes just a month after the prior record holder, the 5 million rial, came out.

As prices continue to spiral higher while the war boosts demand for cash, long lines formed to withdraw the fresh banknotes, and supplies quickly ran out.

Iran’s central bank said electronic payments are still the main methods for transactions, though the 10 million rial bill will “ensure public access to cash,” the FT reported.

But doubts about the viability of electronic payments have grown during the war as the U.S. and Israel target the regime’s levers of control.

In addition to bombing Islamic Revolutionary Guard Corps and Basij paramilitary forces, a data center for Bank Sepah was also hit on March 11. Sepah is the country’s largest bank and is responsible for paying salaries to the military and IRGC.

“Iran is already in the middle of a severe cash liquidity crisis,” Miad Maleki, a senior advisor at the Foundation for Defense of Democracies and a former Treasury Department official, said on X earlier this month. “As of Jan 2026, banks were running out of physical banknotes daily, with informal withdrawal caps of just $18–$30/day. Cash in circulation surged 49% YoY due to panic hoarding. The regime simply cannot pivot to cash payments, there isn’t enough physical currency in the system.”

Meanwhile, a currency collapse that began after last year’s U.S.-Israeli bombardment has fueled crippling inflation. The rial lost 60% of its value in the months after the 12-day war, and food inflation soared to 64% by October. It accelerated further to 105% by February, vaulting overall inflation to 47.5%.

The exchange rate fell as low as 1.66 million rials per $1 last month, though it strengthened to about 1.5 million rials as the U.S. temporarily lifted sanctions on Iranian oil.

Heightened demand for cash further stresses a financial system that was considered dubious even before the current war started three weeks ago.

The failure of Ayandeh Bank late last year forced the regime to fold it into a state-run lender, underscoring how fragile the sector was as bad loans piled up to politically connected cronies.

“This was largely theater. In reality, Iran’s entire banking system is insolvent, its balance sheets sustained by fiction rather than assets,” Siamak Namazi, who was a U.S. hostage in Iran from 2015 to 2023, wrote in a report for the Middle East Institute in January.

During his captivity, he learned from imprisoned former officials and business elites that politically connected borrowers bribed assessors to inflate the value of properties, which were used to obtain massive loans.

Instead of repaying the loans, borrowers just gave their properties to the bank, which sold them to other banks at a paper profit, according to Namazi. Those banks knew the properties were overvalued “garbage,” but played along in the scheme by dumping their own toxic assets in exchange and booking fictitious gains.

“The result is a closed-loop Ponzi scheme, sustained by mutual deception and regulatory complicity,” he added. “This practice has metastasized over the past 15 years and is far more extensive than this simplified description suggests. And this is only the banking system. Much of the rest of Iran’s economy is afflicted by similarly entrenched corruption and mismanagement.”

Remember 2020/21, when Covid-19 crashed stock markets? At their 2020 lows, the UK FTSE 100 and US S&P 500 indexes had collapsed by 35%. Nevertheless, 2020/21 was a great time to buy shares, because returns have been outstanding since.

But would I done better five years ago buying the S&P 500 or investing in gold, one of the world’s oldest stores of value?

Over the past five years, the S&P 500 has leapt by 70.4%. However, this capital gain excludes cash dividends — regular cash returns paid by some companies to shareholders.

Adding dividends, the S&P 500’s return jumps to 81.8%, turning $10,000 into $10,818. That works out at a compound yearly growth rate of 12.7%.

Then again, as a British investor, I buy US assets using pounds sterling. The US index’s return in GBP terms over five years is 13.6% a year. This equates to a five-year total return of 89.2% — still a handsome result for UK buyers of US shares.

For many, gold is the ideal asset in times of trouble. First, it has several uses: as a store of value (often in bank vaults), for jewellery, and as an excellent conductor of electricity in electronics. Second, it is scarce: all the gold ever mined would fit into a cube with sides of under 23m.

As I write, the gold price stands at £3,484.50. This is up an impressive 178.5% over the past five years. That works out at a compound yearly growth rate of 22.7% a year — thrashing the S&P 500’s returns.

Of course, gold pays no income, but these bumper returns can more than make up for this omission. Then again, with the S&P 500 worth around $60trn, its gains have been enjoyed by a much larger cohort of investors

Thus, over the past five years, investors have made more money owning gold than investing in the S&P 500. And speaking of high-performing investments, here’s another hidden gem from spring 2021…

As an older investor (I turned 58 this month), my family portfolio is packed with boring, old-school FTSE 100 and FTSE 250 shares that pay generous dividends.

For example, my family owns shares in Lloyds Banking Group (LSE: LLOY), whose stock has soared since 2021. As I write, Lloyds shares trade at 96.68p, valuing the Black Horse bank at £56.7bn.

Over one year, the shares are up 37.8%, easily beating major market indexes. Over five years, this stock has soared by 135.6% — comfortably beating most UK and US shares over this timescale.

Again, the above returns exclude dividends, which Lloyds stock pays out generously. Right now, its dividend yield is 3.8% a year, beating the wider FTSE 100’s yearly cash yield of 3.1%.

Earlier this year, Lloyds shares were riding high, peaking at 114.6p on 4 February. They have since fallen by 15.6%, driven down by the US-Iran war, soaring energy prices, and fears of an economic slowdown. Of course, if the UK endures another recession, banking revenues, profits, and cash flow could take a nasty hit.

That said, sticky, above-target inflation hinders the Bank of England from cutting interest rates. This boosts Lloyds’ net interest margin, boosting its 2026 earnings. And that’s why we will keep holding tightly onto our Lloyds shares!

The post Should investors have bought gold or the S&P 500 5 years ago? appeared first on The Motley Fool UK.

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The Motley Fool UK has recommended Lloyds Banking Group. Cliff D’Arcy has an economic interest in Lloyds Banking Group shares. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services, such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool, we believe that considering a diverse range of insights makes us better investors.

Motley Fool UK 2026

In my work helping people think through retirement planning decisions, I often see people focus heavily on preparing their tax return but spend very little time reviewing it afterward.

By the time tax season ends, most people treat the document like a receipt: They file it, save a copy somewhere and move on.