Micro-bubbles may arise in the oil-paper insulation during the transformer overload condition, which may cause insulation failure in oil-immersed transformers. In this paper, a multi-physics simulation model, coupled with the physics of electrostatics, flow field and particle tracking is established to study the movement characteristics of bubbles in the transformer oil gap and their effect on insulation. The trajectories of bubbles in the oil gap between the high-voltage winding and the angle ring are simulated under the AC electric field, and the changes of bubble velocity and force are analyzed. The results show that the velocity of bubbles fluctuates periodically with a period of half power frequency. The drag force plays a balancing role among the forces acting on the bubble, resulting in a much small resultant force on the bubble. Most notably, the variation trend of the bubble velocity is directly related to the oil velocity at the location of the bubble and some bubbles may aggregate in the transformer electrostatic ring and the corner of the angle ring. The electric field inside the bubble is larger than that in the oil, therefore those aggregated bubbles may lead to partial discharge. The results of this paper can provide a theoretical reference for how to assess the damage caused by bubbles in the oil-paper insulation.