Preheat oven to 325°F (165°C).
Cook diced bacon in a Dutch oven until crisp and remove with a slotted spoon.
Brown beef cubes in bacon fat in batches until well seared.
Remove beef and sauté onions and carrots until lightly browned.
Add garlic and tomato paste and cook briefly.
Stir in flour and cook for 1 minute.
Return beef and bacon to the pot.
Pour in red wine and beef broth until meat is just covered.
Add thyme and bay leaf and bring to a simmer.
Cover and transfer to oven to braise for 2½ hours.
Sauté mushrooms and pearl onions separately until golden.
Add mushrooms and onions to stew during the last 30 minutes.
Remove bay leaf, adjust seasoning, and serve hot.