Preheat oven to 350°F (175°C). Cook bacon in a Dutch oven over medium heat until crispy, then set aside. Brown beef cubes in bacon fat in batches until seared. Remove and set aside.
Add onion and carrots to the pot, sautéing until softened, about 5 minutes. Stir in garlic and tomato paste, cooking for 1 minute. Sprinkle flour over 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, browned beef, and bacon. Bring to a simmer, cover, and transfer to the oven. Cook for 2.5 hours, stirring halfway through.
In a skillet, heat butter and olive oil over medium heat. Sauté mushrooms and pearl onions until golden brown, about 8 minutes. Add to the stew during the last 30 minutes of cooking.
Adjust seasoning with salt and pepper. Remove thyme and bay leaf before serving.
Notes
For a richer flavor, use a high-quality dry red wine and fresh herbs if available.