Elastic capsules occur in nature in the form of cells and vesicles and are manufactured for biomedical applications. They are widely modelled, but there are few analytical results. In this paper, complex variable techniques are used to derive semi-analytical solutions for the steady-state response and time-dependent evolution of two-dimensional elastic capsules with an inviscid interior in Stokes flow. This provides a complete picture of the steady response of initially circular capsules in linear strain and shear flows as a function of the capillary number Ca. The analysis is complemented by spectrally accurate numerical computations of the time-dependent evolution. An imposed nonlinear strain that models the far-field velocity in Taylor's four-roller mill is found to lead to cusped steady shapes at a critical capillary number Ca c for Hookean capsules. Numerical simulation of the time-dependent evolution for Ca > Ca c shows the development of finite-time cusp singularities. The dynamics immediately prior to cusp formation are asymptotically self-similar, and the similarity exponents are predicted analytically and confirmed numerically. This is compelling evidence of finite-time singularity formation in fluid flow with elastic interfaces.