Thanks to the distinctive morphology of graphite particles in its microstructure, compacted graphite iron (CGI) exhibits excellent thermal conductivity together with high strength and durability. CGI is extensively used in many applications, e.g., engine cylinder heads and brakes. The structural integrity of such metal-matrix materials is controlled by the generation and growth of microcracks. Although the effects of the volume fraction and morphology of graphite inclusions on the tensile response of CGI were investigated in recent years, their influence on crack initiation is still unknown. Experimental studies of crack initiation require a considerable amount of time and resources due to the highly complicated geometries of graphite inclusions scattered throughout the metallic matrix. Therefore, developing a 2D computational framework for CGI with a random microstructure capable of predicting the crack initiation and path is desirable. In this work, an integrated numerical model is developed for the analysis of the effects of volume fraction and nodularity on the mechanical properties of CGI as well as its damage and failure behaviours. Finite-element models of random microstructure are generated using an in-house Python script. The determination of spacings between a graphite inclusion and its four adjacent particles is performed with a plugin, written in Java and implemented in ImageJ. To analyse the orientation effect of inclusions, a statistical analysis is implemented for representative elements in this research. Further, Johnson–Cook damage criteria are used to predict crack initiation in the developed models. The numerical simulations are validated with conventional tensile-test data. The created models can support the understanding of the fracture behaviour of CGI under mechanical load, and the proposed approach can be utilised to design metal-matrix composites with optimised mechanical properties and performance.