I think the Telvanni might have done remarkably well in this. Apparently only southern Vvardenfel was occupied. I assume the Argonians don't have the strength or courage to risk meddling in the affairs of wizards.
I would think that, though I would also remember that the Argonians hated the Telvanni the most of all the houses for their most-flagrant practice of slavery. That, and while not as magically inclined as the mer (or manmer) races, the Argonians were still relatively gifted in magic, so it's not like it was a bunch of luddites going against one of Tamriel's most-powerful groups of wizards. I'd rank the Telvanni third, behind the Altmer of
Summerset Alinor, and the (not really organized) mages of the Illiac bay. As after all:
Spoiler Nulfaga, in spite of being "just a Breton," DID conjure a hurricane in the dead of winter on an hour's notice, after all
I don't think that they managed to capture ALL of Morrowind's mainland, but likely went quite deep into it, and probably focused a lot on the Telvanni Peninsula. (I never heard if there was another name for it, admittedly) I doubt they'd have actually taken the Telvanni Isles, though. While the Argonians COULD arguably swim, it's quite a distance, and the waters are dangerous even if you can't drown. I know the Sea of Ghosts was infamous for a really bad dreugh and slaughterfish infestation, so the other coastal areas around there might be similar. That, and of course there's always the standard "Kamikaze" trick wizards tend to pull off, such as when the Psyjic obliterated an invasion fleet from Pyondanea.
Reasonably, I'd expect that House Telvanni would survive, but would likely see their influence largely negated. The other Dunmer may even have disowned them, possibly blaming them for the invasion. This would leave them largely cut of from the world, given that they sit way out in the far corner of Tamriel.
This is sad news. Hopefully Fyr managed to survive the onslaught of red year.
It'd be shocking if he didn't. Given both his earlier decision to distance himself from house Telvanni, and his inclination to protect his daughters, his patients
*, and his friend Mr. Bagarn, that he likely would've avoided putting his place in the line of fire. I had the impression that he expended a lot of magic fortifying his tower, which given it's location along Azura's coast, would've likely ensured it sustained at most minimal damage from Red Mountain's eruption. And, of course, I have the impression that after the eruption, the Argonians didn't really care for the island, and focused on the mainland; given that he also kept no slaves that I recall, he'd have escaped their notice. (and any incursion into his territory, given the apparent lack of reward, would've been dissuaded quickly)
On this forum, one of the devs wrote that Fyr did survive. Although I don't know if this is canon, that's good enough for me.
(Actually I wouldn't expect him to have survived, even with his tower and underground Corprusarium, but that's just my guess.)
If a dev says it in the Lore forums, ESPEICALLY if it's that Dev's character (I do reall Dyviath being VXSS's) then it's 100% canon. This Lore section exists for a reason: the devs are actually fans of the lore of their own series.