Heat olive oil in a large, heavy pot over medium heat. Cook and stir onion and garlic in hot oil until tender, 5 to 7 minutes.

Stir crushed tomatoes, tomato sauce, tomato paste, and water into onion mixture until smooth; add sugar, parsley, basil, salt, Italian seasoning, fennel, and pepper. Stir well and bring to a simmer; reduce heat to low and cook, stirring occasionally, until thickened, 1 to 1 1/2 hours.