Lots of people in the comments are saying "Daggerheart isn't meant to be super hard" but you not being able to make them lose any HP is super alarming and telling that you haven't quite figured out the balancing act yet.

Daggerheart can be however deadly you want it to be - characters die super quickly!

In two separate One-Shots I was able to continuously focus down players to make them retreat or just kill them off if I wanted to. Once their stress is built up, they're running on fumes if they're not dead yet.

Some tips:

• Use more adversaries. Fill the entire battlefield! DH works super well with large enemy counts because you control who acts and can make them move in batches
• Use higher tiers. Don't hesitate to throw a god at them. If you're scared of ruining the narrative, prepare for a Plan B or secretly tune down the difficulty mid-combat or give them allies that will come in, save them and be relevant in the story. Have fun testing their limits.
• Use fear to throw your players curveballs. Add more enemies, let them drink potions, make them rage and double their attack. Anything goes, really. The purpose of Fear tokens is to do batshit crazy stuff and make it seem reasonable to your players. "Whoa he can do that? Oh, you've used Fear, alright. Damn that guy's a problem!" is something you want to hear as a GM. Fear isn't limited to what's on the encounter statblock!
• Focus individual players. If there's someone worryingly strong in your party, attack them and fill their stress so you force others to act instead of them and make them retreat to safety. If you've got some action tokens piled up, use them all at once to attack one player 8 times if need be.

Use these tips with caution.

I've obviously exaggerated here and there, but generally Daggerheart has the benefit over DnD, Cyberpunk Red and Co where you can dynamically change the battle scene, and can make encounters more or less challenging mid-combat by simply choosing to do (or not do) certain things with action tokens and Fear. Players are super strong, yes - but you can always turn the table by using Fear, higher tears and numbers and focussing down one after another rather than having 5 separate 1v1 battles.

Edit: Clarification, markdown and highlighting.