I would suggest that you ask this question in AskScience or another subreddit similar to it, or even doing your own quick research, if you'd like to learn more about this event.

I did a quick Google search, and found an eyewitness account from Dr. Jose Maria de Almeida Garret, which shares most of the same details that other people shared (such as the storm turning into a clear day, colors changing, the strange sun, etc.). http://www.fatima.org/essentials/facts/miracle.asp

In my opinion, I think that the event could be explained by Parhelions. Parhelions are made by the refraction of light from ice crystals in Cirrus clouds. Parhelions usually appear to be extra suns in the sky, and are sometimes multi-colored. http://en.wikipedia.org/wiki/Sun_dog