Preheat oven to 350°F (175°C).

In a large Dutch oven over medium heat, cook the diced bacon until crispy. Remove and set aside, leaving the rendered fat in the pot.

Season the beef with salt and pepper. Brown the beef in batches in the bacon fat until well-seared. Remove and set aside.

Add the chopped onion and carrots to the pot, sautéing until softened, about 5 minutes. Stir in garlic and tomato paste, cooking for 1 minute.

Sprinkle the flour over the vegetables and cook for 1-2 minutes, stirring constantly.

Gradually stir in red wine, scraping the bottom to deglaze the pot. Add beef stock, bay leaf, thyme, and browned beef with bacon. Bring to a simmer.

Cover and transfer the pot to the oven. Cook for 2.5 hours, stirring halfway through.

In a skillet, heat butter and olive oil over medium heat. Sauté the mushrooms and pearl onions until golden brown, about 8 minutes.

Add the sautéed mushrooms and pearl onions to the stew during the last 30 minutes of cooking.

Adjust seasoning with salt and pepper. Remove thyme and bay leaf before serving.