In a heavy-bottomed pot or Dutch oven, cook diced bacon over medium heat for about 5-7 minutes until crispy and golden. Remove the bacon with a slotted spoon, leaving the rendered fat in the pot.

Pat the beef dry with paper towels, then season generously with salt and pepper. In batches, brown the beef in the hot bacon fat for about 12-15 minutes, turning to achieve deep caramelization on all sides.

Add the pearl onions and carrots to the pot with the residual fat, sautéing for about 8 minutes until they soften. Stir in the minced garlic and cook for another minute. Sprinkle the flour over the vegetables and mix well.

Pour in the red wine, scraping up the browned bits from the bottom. Cook for about 2-3 minutes, then add beef broth and herbs. Return the browned beef and bacon to the pot, mixing everything well.

Bring to a gentle simmer over medium heat. Cover the pot and transfer to a preheated oven set to 325°F (163°C) for 2 to 2½ hours.

Sauté the pearl onions and sliced mushrooms in a separate pan until golden. Add them to the stew during the last portion of cooking.

Once cooked, remove the bay leaves, and gently fold in the juices. Allow to rest for 10 minutes before serving.