Heat the oil in a medium Dutch oven or soup pot over medium heat. Add the fideo and cook, stirring often, for 3 to 5 minutes, until most of the noodles are golden brown. Watch closely near the end so they toast without burning.
Add the onion and cook for 2 minutes, stirring, until it begins to soften. Add the garlic and stir for 30 seconds, just until fragrant.
Carefully pour in the tomato sauce, vegetable broth, and water. Stir in the salt and pepper, scraping the bottom of the pot to loosen any toasted noodle bits.
Bring the soup to a gentle boil. Reduce the heat to maintain a steady simmer and cook uncovered for 8 to 10 minutes, stirring once or twice, until the noodles are tender and the broth is lightly thickened.
Taste and add more salt if needed. Ladle into bowls and top with cilantro. Serve hot with lime wedges and avocado, if using.