Heat the olive oil in a large pot over medium heat. Add the onion and sauté, cooking until the onion is tender and translucent about 6 minutes.
Add the garlic and sauté until fragrant, about an additional 30 seconds.
Add the tomatoes with their liquid, bay leaves, basil and ½ cup of water.
Lower the heat to medium-low, let simmer, and stir occasionally until the sauce thickens about 30 minutes. Discard bay leaves and season with salt and pepper.
Serve as is or if you prefer a smoother sauce, take about 3 cups of the sauce, let it cool slightly then add to a blender. Pulse until smooth, about 30 seconds. Stir it back in with the rest of the sauce.
Store the sauce refrigerated in an airtight container for up to 1 week, frozen or serve.