[Baalz]

Its hard to tell the exact mechanics on this from testing due to the randomness, but anecdotally units within the fear aura have their morale "damaged" at a level corresponding to the fear aura with random variation, then a route check is performed. Each round morale "heals" a certain amount and if the unit is still in the fear aura (which varies as described) re-damaged. So, with any significant fear the moral is steadily dropping faster than it's healing adjacent to the unit and even very high morale units will drop down and route in a few turns with no casualties. Of course battle has to last that long...which is one obvious counter.

On top of the fear counters already mentioned here, morale 30 units are immune to fear and only (I think) route due to the total hps of their side dropping to 20%. Also, fear has a limited range and morale checks are for the entire squad, so if you've got decent to good moral and a huge squad such that most of the squad's morale is not dropping then you'll be fine (unless you're taking big casualties). Keep in mind berserking and mindless units don't bump up the morale of other units in their squad.