Heat the olive oil in a large pot over medium heat. Add the chopped bacon and cook for about 3 minutes, until it releases its fat and becomes lightly crisp. Transfer the bacon to a plate, leaving the rendered fat in the pot.

Pat the beef dry with paper towels. Sear it in batches in the hot oil and bacon fat until well browned on all sides. Transfer the browned beef to a plate.

Add the butter to the pot. Cook the mushrooms for about 3 to 5 minutes, until golden and lightly caramelized. Transfer them to a plate.

Add the onions and carrots to the same pot and cook for a few minutes, until they begin to soften.

Return the mushrooms and bacon to the pot. Stir in the tomato paste and garlic and cook for about 2 to 3 minutes, until fragrant and the tomato paste darkens slightly.

Sprinkle in the flour and stir well. Cook for a few minutes, stirring, so the flour coats the vegetables.

Pour in the red wine and water. Return the beef to the pot, then add the thyme, bay leaves, salt, and black pepper. Stir well.

Cover and simmer gently for about 90 minutes, until the beef is tender.

Remove the lid and simmer uncovered for another 10 to 15 minutes, if needed, until the sauce is rich, glossy, and thick enough to lightly coat the back of a spoon.

Remove the bay leaves, taste, and adjust the seasoning before serving.