Heat oil in a large skillet over medium heat. Cook and stir 1 cup chopped onion in the hot oil until softened, about 5 minutes. Stir in diced tomatoes, tomato sauce, and garlic; simmer uncovered until flavors combine, about 30 minutes.
Divide refried beans, 1/2 cup chopped onion, 1/2 cup black olives, and 1/2 cup Mexican cheese blend evenly among tortillas; roll up tortillas to enclose filling. Arrange rolled tortillas seam side-down in a shallow baking pan.
Pour tomato sauce evenly over tortillas. Sprinkle remaining 1/4 cup black olives and 1/4 cup Mexican cheese blend on top.
Bake in the preheated oven until filling is heated through, about 30 minutes.