Failure in elastic dual-phase materials under transverse tension is studied numerically. Cohesive zones represent failure along the interface and the augmented finite element method (A-FEM) is used for matrix cracking. Matrix cracks are formed at an angle of 55 deg - 60 deg relative to the loading direction, which is in good agreement with experiments. Matrix cracks initiate at the tip of the debond, and for equi-biaxial loading cracks are formed at both tips. For elliptical reinforcement the matrix cracks initiate at the narrow end of the ellipse. The load carrying capacity is highest for ligaments in the loading direction greater than that of the transverse direction.