models exist, the true microscopic origin of these defects remains elusive. For the first time we show that these defects may arise from delocalisation of the atomic position of the oxygen in the oxide forming the Josephson junction barrier. Using a microscopic model, we compute experimentally observable parameters for phase qubits. Such defects are charge neutral but have non-zero response to both applied electric field and strain. This may explain the observed long coherence time of two-level defects in the presence of charge noise, while still coupling to the junction electric field and substrate phonons.