The move offers top Swiss-based oil traders such as Glencore and Trafigura a legal loophole for dealing in Iranian crude, although the prospect of falling foul of EU and EU restrictions will almost certainly deter them.
Both firms said they have halted all Iranian oil trade.
Switzerland is one of the top centres for physical oil trading and also hosts a branch of the National Iranian Oil Company, although the country does not import oil from Iran.
New Swiss sanctions, which come into force today, will affect supplies for the petrochemical industry, telecommunications equipment, as well as the purchase and sale of precious metals and diamonds, the Federal Department of Economic Affairs said.
They follow an EU ban on the importation, purchase or shipping of Iranian oil which was rolled out on 1 July in an effort to pressure the Islamic Republic over its disputed nuclear programme. Toughened US sanctions on Iran took effect on June 28.
"The public relations penalty the larger traders will pay if caught trading with Iran is colossal," said Matthew Parish, partner at Geneva-based law firm Holman Fenwick Willan.
"The space preserved by the decision is really for smaller traders, who operate only in Switzerland and other countries operating outside of international sanctions," he said.
Not an EU member and traditionally neutral, Switzerland has no legal obligation to follow EU sanctions, although in recent years it has tended to harmonise its laws with those of its main trading partners.
US Ambassador to Switzerland Donald S. Beyer said last month that the United States was disappointed that Swiss authorities had not adopted the EU embargo, adding that he did not expect them to permit the evasion of sanctions.
The country in April also exempted Iran's central bank from its asset freeze.
Swiss President Eveline Widmer-Schlumpf defended the country's independent stance, adding that this is helping US interests by allowing communication between Tehran and Washington.
Switzerland has represented American interests in Iran since Iran's Islamic revolution in 1979.