Heat 2 tablespoon olive oil in a heavy-bottomed pot over medium-high heat. Brown lamb pieces in a single layer without crowding for 3-4 minutes per side until deep golden crust forms. Remove to a plate and repeat with remaining lamb, adding more oil if pan looks dry.
2 lbs lamb shoulder, 3 tbsp olive oil
Lower heat to medium, add remaining 1 tablespoon olive oil. Cook diced onions for 4 minutes until softened. Add minced garlic and cook 1 minute until fragrant. Stir in smoked paprika and cook for 30 seconds to bloom the spice.
1 large onion, 4 cloves garlic, 3 tbsp olive oil, 2 tsp smoked paprika
Pour in white wine and scrape up browned bits from bottom of pot with a wooden spoon for 2 minutes. Add diced tomatoes, bay leaves, salt, and pepper. Return browned lamb and any accumulated juices to the pot.
1 cup white wine, 3 tomatoes, 2 bay leaves, salt, black pepper, 2 lbs lamb shoulder
Bring to a boil, then reduce heat to low simmer at 180-190°F. Cover and cook for 1 hour 15 minutes. Add potatoes and red peppers, cover and cook an additional 30 minutes until lamb reaches 195°F internal temperature and potatoes are fork-tender.
3 potatoes, 2 red bell peppers
Remove lid, simmer uncovered for 15 minutes to thicken sauce. Adjust seasoning with salt if needed. Turn off heat and let stew rest for 10 minutes before serving.
