In a large non-aluminum saucepan, heat the olive oil over medium heat. Add onion and sauté for 3 to 5 minutes, or until softened.
Add sliced bell peppers, tomatoes, chile, and basil, cover partially, and cook over medium-low heat for about 20 minutes, or until softened. Remove from heat.
Purée the vegetables in a food processor fitted with the metal blade for about 1 minute, until the mixture is smooth with some texture remaining. Add the salt and pepper, tasting for seasoning.